High-quality foods and simple meals manufacturer
Campbell Soup Company
) reported third-quarter 2012 adjusted earnings per share of 56
cents, surpassing the Zacks Consensus Estimate of 52 cents.
However, the quarter's results witnessed a decline of 2% from the
During the quarter, net sales remained almost flat at $1,821
million compared with the prior-year quarter, beating the Zacks
Consensus Estimate of $1,812 million. Benefit from 3% spike in
price and sales allowances were fully offset by negative impact
from volume and mix of 1% along with 2% increase in promotional
Higher input cost inflation coupled with increased promotional
expenses and unfavorable mix, dragged down gross margin rate to
38.8%, a contraction of 160 basis points from the prior-year
quarter level of 40.4%, partially offset by increased selling
prices and productivity enhancement.
During the quarter, marketing and selling expenses grew 5% to
$256 million due to increased advertising and promotional expenses,
partially offset by less selling expenses. Consequently, adjusted
EBIT declined 13% to $268 million compared with $307 million in the
prior-year quarter, while adjusted EBIT margin contracted 220 basis
points to 14.7% from 16.9% reported in the previous-year
U.S. Simple Meals:
Third quarter sales at the U.S. Simple Meals division fell
2% year over year to $567 million, primarily due to a decline of 5%
in volume and mix and 1% increase in promotional expenses,
partially offset by a 4% rise in price and sales allowances. Sales
of U.S. Soup dropped 3% as sales of ready-to-serve soups inched
down 1% while condensed soups declined 5 %.
During the quarter, operating income plummeted 14% to $120
million compared with $139 million in the year-ago quarter,
primarily due to input cost inflation, unfavorable volume mix,
higher advertisement and promotional expenses, partially offset by
increased pricing and enhanced productivity.
Sales at the U.S. Beverages division rose 5% year over year to $208
million, due to a 7% rise in volume and mix, partially offset by a
2% increase in promotional spending.
However, increased input costs and higher advertisement and
promotional expenses led to a year-over-year decline of 16.7% in
segment's operating income to $45 million from $54 million reported
in the prior-year quarter.
Global Baking and Snacking:
Campbell's Global Baking and Snacking segment sales rose 3% to $543
million. The results primarily benefited from a 6% rise in price
and allowances and a 1% positive impact from currency translation,
offset by a 4% increase in promotional spending.
However, input cost inflation and increased promotional
expenditure led to an 11% decline in segment's operating income to
$73 million compared with $82 million in the prior-year
International Simple Meals and Beverages:
Sales at International Simple Meals and Beverages inched down 1% to
$349 million, primarily due to lower sales and volumes in Europe
and Asia Pacific along with increased promotional spending and
negative currency translation effect. However, this was partially
offset by increased sales in the Canada and favorable price and
However, segment's operating income declined nearly 9.8% to $37
million from $41 million in the year-ago period.
North America Foodservice:
The North America Foodservice division's quarterly sales were flat
year over year at $154 million. Benefit from price and sales
allowances were fully offset by unfavorable volume and mix and
increased promotional expenses. Operating income in the quarter
decreased by $2 million to $20 million.
Campbell retained its fiscal 2012 guidance, targeting sales
growth in the 0%-2% range. The company also reiterated its adjusted
earnings per share guidance of $2.35 to $2.42, reflecting a decline
of 5%-7% from 2011 earnings per share of $2.54.
Campbell Soup operates in a highly competitive food industry and
experiences worldwide competition in all its principal products
from such well-established rivals as
General Mills Inc.
H. J. Heinz Co.
Currently, Campbell Soup has a Zacks #3 Rank, implying a
short-term 'Hold' rating on the stock. However, we maintain our
long-term 'Neutral' recommendation on the stock as we believe that
Campbell's prudent investment and strategic initiatives toward
product innovation and brand building will lead to an increase in
its customer base and profitability.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
To read this article on Zacks.com click here.