We are maintaining our long-term Neutral recommendation on New
Jersey based
Campbell Soup Company
(
CPB
).
Campbell recently reported its fourth quarter and fiscal 2012
results (ended July 2012). Going with its strategy of brand
expansion and cost management, the company reported
better-than-expected quarterly results.
Its reported net sales of $1,613 million for the quarter were
higher than the prior-quarter level as well as Zacks Consensus
Estimate. Moreover, quarterly earnings of 41 cents per share were
also ahead of the Zacks Consensus Estimate of 38 cents.
Further, the company anticipates an improvement in sales in the
range of 10%-12% for the fiscal 2013, with annual earnings to lie
between $2.51 and $2.57 per share, reflecting an increase of 3%-5%
from 2012 level.
Going forward, the company's recent Bolthouse acquisition will
prove to be accretive to its fiscal 2013 top and bottom line. In
addition, the company intends to boost its top line and increase
return on investment through a new strategic framework, primarily
focusing on brand expansion, and thereby plans to launch nearly 50
new products in fiscal 2013 while emphasizing on brand
advertisement and consumer promotional activities.
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. Moreover,
the company's continuous focus on research and development to
further differentiate its higher-margin sauces brands will
strengthen its competitive position in the international
market.
On the flip side, rising commodity costs, intense competition
from other established players and exposure to unfavorable foreign
currency fluctuations may undermine the company's growth
prospects.
Due to its exposure in international market, Campbell Soup
remains prone to currency fluctuations, which remains a major
reason for continuous decline in its International Simple Meals and
Beverages segment. Sales at this segment declined 7.0% to $294.0
million in the fourth quarter 2012, primarily due to a 4% rise in
promotional spending and 8% negative impact from currency
translation.
Moreover, Campbell operates in a highly competitive food
industry and experiences worldwide competition in all its principal
products from well-established rivals like
General Mills Inc.
(
GIS
),
H. J. Heinz Co.
(
HNZ
), which may dent the company's performance going forward.
Considering these above factors, we think that the investors
should wait to own this stock until its strategic initiatives and
turnaround plans reflect better visibility.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
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