High-quality foods and simple meals manufacturer,
Campbell Soup Company
) reported robust second-quarter 2013 financial results.
Quarterly adjusted earnings per share increased 9% year over year
to 70 cents and surpassed the Zacks Consensus Estimate of 66
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Net sales increased 10.5% to $2,333 million from $2,112 million
in the prior-year quarter. Moreover, it inched above the Zacks
Consensus Estimate of $2,330 million. During the quarter, sales
benefited from the acquisition of Bolthouse Farms that
contributed 9% to sales, as well as a 2% rise in price and sales
allowances, partially offset by negative impact from 1% increase
in promotional spending.
Adjusted gross margin rate of 36.8%, contracted of 160 basis
points from the prior-year quarter level of 38.4%, mainly due to
the acquisition of Bolthouse Farms, which has a low gross margin
structure. In dollar terms, however, gross profits rose 6% year
over year to $859 million.
In the quarter, marketing and selling expenses remained flat at
$297 million mainly as increased advertising and promotional
expenses in the U.S. Soup business were counterbalanced by
increase in innovation related costs, escalated selling expenses
and expenses related to Bolthouse Farms.
Adjusted operating income rose 5% to $349 million compared with
$332 million in the prior-year quarter, attributed to lower
marketing costs, partly offset by elevated selling expenses and
R&D costs. However, adjusted operating margin contracted 70
basis points to 15.0% from 15.7% reported in the previous-year
U.S. Simple Meals:
Second quarter sales at this division inched up 1% year over year
to $833 million, driven by a 2% increase in price and sales
allowances offset by 1% decline in volume and mix. Sales of U.S.
Soup inched up 1% as sales of ready-to-serve soups grew 8% and
condensed soups inched up 1%, while sales of broth declined 12%.
Sales of U.S. Sauces were flat compared to last year.
During the quarter, operating income grew 10% to $191 million
compared with $174 million in the year-ago quarter, primarily
driven by earnings growth in U.S. Soups, partially offset
declined in U.S. Sauces. Further, gains from productivity
improvements, higher selling prices, and lower marketing costs
were offset by lesser volumes and cost inflation.
Sales at this division dipped 3% year over year to $182 million
due to decline in volume and mix. Sales declines in "V8"
vegetable juice and "V8 V-Fusion" beverages, slightly offset by a
rise in "V8 Splash" juice beverages led to the fall.
However, lower advertising expenses and productivity improvements
more than offset by volume declines and cost inflation, resulted
in an 8.8% increase in operating profits compared to last year at
Global Baking and Snacking:
This segment's sales increased 7% to $561 million. The results
primarily gained from a 6% rise in volume and mix and 1% increase
in price and sales allowances, offset by the 1% negative impact
of increased promotion expenses and 1% currency effects.
Segment operating income rose by $3 million to $74 million
compared with $71 million in the prior-year quarter, due to
strong performance at Pepperidge Farm, offset by lower earnings
in Arnott's. Moreover, results gained from improved volumes and
productivity at the segment, offset by higher promotional
spending and cost inflation.
International Simple Meals and Beverages:
Sales of this segment inched up 1% to $405 million, primarily due
to 1% increase in volume and mix and 2% rise in price and sales
volumes, offset in part by 3% negative impact from promotional
spending and 1% from currency translation. Region wise, higher
sales in Latin America and Canada were partially offset by
declines in the Asia Pacific region.
However, the segment's operating income of $54 million was down
6.9% from $58 million in the year-ago period led by the weak
performance in Canada.
Bolthouse and Foodservice:
This segment comprises of Bolthouse Farms business, which was
acquired on Aug. 6, 2012, and the North America Foodservice
business. This division's quarterly sales rose 103% to $352
million from $173 million reported for the North American
business last year.
During the quarter, Bolthouse contributed $195 million to segment
sales, while sales at North America Foodservices declined 10%.
The decline in North American Foodservice was due to lower frozen
and soup sales, due to the loss of a major restaurant customer.
Operating income rose by $2 million to $30 million mainly due to
the acquisition of Bolthouse Farms, offset by lower earnings in
North America Foodservice.
Campbell reiterated its fiscal 2013 guidance, targeting sales
growth in the 10% to 12% range. The company also maintained its
adjusted earnings per share guidance of $2.51 to $2.57.
Adjusted operating income is anticipated to increase in the 4% to
6% range. Further, in fiscal 2013, Campbell expects Bolthouse
Farms to contribute approximately $750 million to sales and add 5
cents to 7 cents per share to adjusted earnings per share.
Currently, Campbell Soup retains Zacks Rank #2 (Buy). Other
stocks performing well in the food space include
Chiquita Brands International Inc.
Flowers Foods Inc.
J&J Snack Foods Corp.
), all of which hold a Zacks Rank #1 (Strong Buy).