Campbell Soup Company (NYSE: CPB) is getting crushed after a worrisome earnings report. The maker of canned soup and other canned and prepackaged foods is seeing what appears to be the worst post-earnings drop in close to five years. Investors should not try to catch falling knives, but this will likely have ended up being a gift from the market gods for long-term investors who can smooth over the noise after the dust settles and after the analysts get their downgrades and estimate cuts out of the way.

The stock drop is being magnified because its quarterly report was $0.66 in earnings per share and sales were down almost 2% to $2.17 billion. Analysts were calling for $0.86 per share and were looking for sales to be more than $100 million than the company reported.

Campbell projected that its operating profit will now be up only by around 4% versus a prior target of 5% growth. That translates to roughly $2.58 in earnings per share for the fiscal year ending in July versus a consensus of $2.59 per share.

The company will have lower earnings ahead due in part to slower soup and beverage sales. Year-ago sales were perhaps a tad higher due to colder weather, but the reality is that we have seen this movie before. Campbell has fought private-label soups and foods before, it has had to decide between low-sodium items versus tastier items with higher salt, and it has faced times where it was even almost a luxury good at the peak of the panic in the recession.

Campbell is supposed to be a key defensive stock for most investors. Still, this stock was up 20% so far in 2013 ahead of earnings so the drop on Tuesday was magnified by its performance. Soup division sales were down by about 6% as a weak consumer spending area caused inventory reductions.

The later Thanksgiving holiday also seemed to be an impact on earnings, and ready-to-eat soups were down more than condensed results. Another weakness was V8 Fusion juice drinks. It is banking on new soup introductions to help it meet the 2014 and 2015 business targets.

Campbell Soup shares were down 6.2% in mid-afternoon trading on Tuesday against a 52-week range of $34.30 to $48.83, but shares were down almost 8% at the peak selling this morning. Trading volume of more than 5.2 million shares is already about 250% higher than a normal trading day on volume that appears to be the strongest since February of this year.

Again, we have seen this movie before. It may take a few days or even a bit longer for the dust to settle, but this defensive stock is now back down to about 15-times expected earnings and its dividend is now up at 2.9% because of the drop. Is this drop likely to recover tomorrow? Unlikely, but this will likely look better after a few trading sessions ahead.

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