Be Wary of This S&P 500 Stock After Lamb Weston's Surprise Index Drop

By Micah Zimmerman – Apr 6, 2026 at 4:20AM ESTKey PointsWatching Campbell's drift toward the edge of the S&P 500 is a reminder that investors can’t rely on history or brand strength alone. Cases like Lamb Weston show that these declines unfold slowly. The real mistake isn’t missing the signal -- it’s ignoring it and holding on too long.Last month, Lamb Weston (LW +2.26%) became a cautionary tale. On March 22, 2026, the potato products manufacturer was removed from the S&P 500 and moved to the S&P SmallCap 600, a demotion driven by years of stock declines, soft restaurant traffic, and a market capitalization that no longer belonged in the same room as the index's other 499 members. It was a slow-motion fall that investors could see coming. Image source: Getty Images. That's how these things go. S&P 500 demotions rarely happen overnight. They happen after months of guidance cuts, volume pressure, and share price erosion that quietly pull a company below the floor.

The Lamb Weston story matters not because of what it means for Lamb Weston, but because another S&P 500 consumer name is tracking a disturbingly similar path right now. ExpandNYSE: LWLamb WestonToday's Change(2.26%) $0.87Current Price$39.35Key Data PointsMarket Cap$5.5BDay's Range$37.62 - $39.5252wk Range$37.62 - $67.07Volume19Avg Vol3.3MGross Margin19.76%Dividend Yield3.79% Campbell's has been in the S&P 500 since 1957. That streak is in danger Campbell's (CPB +0.09%) joined the S&P 500 at its founding in 1957, one of roughly 50 original members still on the index today. That kind of longevity feels permanent right up until the moment it isn't. In March, Campbell's reported fiscal second-quarter 2026 adjusted earnings per share (EPS) of $0.51, missing the $0.57 estimate by 11%, while net sales dropped 5% to $2.56 billion. Management cut full-year guidance to adjusted EPS of $2.15 to $2.25 -- down from as high as $2.55 at the start of the fiscal year -- and projected organic net sales to decline 1% to 2%. Tariff exposure is compressing gross margins by an estimated 230 basis points. ExpandNASDAQ: CPBCampbell'sToday's Change(0.09%) $0.02Current Price$22.01Key Data PointsMarket Cap$6.6BDay's Range$21.76 - $22.2052wk Range$20.62 - $40.44Volume325Avg Vol8.6MGross Margin28.97%Dividend Yield8.86% The snacks division, which Campbell's acquired Sovos Brands a couple of years ago to build out, is struggling. Snacks' operating earnings fell to $67 million on $914 million in revenue, a 7.3% operating margin that is well below what the company needs to justify that acquisition. The stock price has fallen more than 40% over the past 12 months, putting its market cap at roughly $6.9 billion, the second-lowest in the S&P 500. For context, four companies were removed from the S&P 500 in the same rebalance that added new members just weeks before Campbell's guidance cut, specifically because they ranked among the index's smallest constituents. Campbell's is now in that conversation. A company that has paid a dividend every year since 1902 doesn't need to be loved by investors to stay in the index, but it does need to stop shrinking. Its brand portfolio -- including Goldfish, Pepperidge Farm, Prego, V8, and Pacific Foods -- is genuinely valuable. The question is whether management can stabilize the business quickly enough to stop market-cap erosion before the index committee runs out of patience. There is no obvious near-term catalyst on the horizon. Be wary -- with Campbell's shrinking in size and momentum, its decades-long spot in the S&P 500 is no longer guaranteed.Read NextMar 25, 2026 •By Catie HoganHere Are 7 Ways the Strait of Hormuz Closure Is Affecting Consumer Staples StocksMar 23, 2026 •By Selena MaranjianShould You Buy the 3 Highest-Paying Dividend Stocks in the S&P 500?Mar 17, 2026 •By Daniel FoelberContrarian Take: This 6.9%-Yielding Dividend Stock Is a Buy at a 23-Year LowMar 15, 2026 •By Daniel FoelberCampbell's Is Dangerously Close to Getting Kicked Out of the S&P 500. Here's Why the High-Yield Dividend Stock Is a Buy Anyway.Mar 11, 2026 •By Motley Fool TranscribingCampbell (CPB) Q2 2026 Earnings Call TranscriptApr 6, 2026 •By Keith NoonanWhy Newsmax Stock Sank 12.3% Last Month But Is Soaring in AprilStocks MentionedCampbell'sNASDAQ: CPB$22.01(+0.09%)+$0.02Lamb WestonNYSE: LW$39.35(+2.26%)+$0.87*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.