Campbell Soup Company
) reported mixed results for the third quarter of fiscal 2014,
wherein its bottom-line result surpassed but the top-line lagged
the Zacks Consensus Estimate. The company's adjusted earnings from
continuing operations increased approximately 7% year over year to
62 cents per share handily beating the Zacks Consensus Estimate of
On a reported basis, earnings from continuing operations came in
at 58 cents per share for the quarter rising over 9% from the
year-ago quarter. Notably, net earnings attributable to the company
(including both continued and discontinued operations) came in 58
cents per share, a penny higher than the year-ago comparable
Net sales increased marginally to $1,973 million in the quarter
compared with $1,962 million in the prior-year quarter. Organic
sales witnessed a year-over-year rise of 1%. However, quarterly
revenues fell short of the Zacks Consensus Estimate of $2,010
During the quarter, acquisitions, price and sales allowances,
and volume and mix contributed 2% each, partly offset by the
negative impact of 2% from currency fluctuations and 3% from
increase in promotional spending.
Adjusted gross margin of 35.2% declined 180 basis points (bps)
from the prior-year quarter level of 37.0%, mainly due to
inflation, acquisition impact, increased promotional expenditure
and higher supply chain costs, partly offset by productivity
enhancement measures and higher selling prices.
In the reported quarter, marketing and selling expenses
decreased 11% year over year to $217 million primarily due to lower
advertising and consumer promotion expenses.
Adjusted earnings before interest and tax (EBIT) Increased 12%
year over year to $310 million mainly due to reduced administrative
and marketing expenses, partly offset by reduced gross margin.
U.S. Simple Meals:
Third-quarter sales at this division increased 7% year over year to
$672 million. This was mainly due to 4% rise in volume and mix, 2%
increase in price and sales allowances and 4% growth due to the
positive impact of Plum Organics acquisition, partially offset by
increased promotional spending.
Sales of ready-to-serve soup and Campbell's condensed soup
declined 1% and 3%, respectively. However, Broth sales increased
14%. Sales of U.S. Sauces increased 25% from the year-ago quarter.
Also, excluding the impact of Plum Organics acquisition, sales of
U.S. Sauces grew 11% mainly due to increased sales of the Prego
pasta sauce, Campbell's dinner sauces and new Pace Mexican
During the quarter, operating income rose 12% year over year to
$175 million, primarily driven by lower administrative and
marketing expenses which were partially offset by reduced gross
Sales at this division fell 4% year over year to $190 million due
to unfavorable volume and mix. A sales decline in "V8 V-Fusion" and
"V8 Splash" beverages cost dearly.
The segment's operating income in the quarter declined 12% year
over year to $29 million primarily due to inflation and supply
chain activities and marketing costs. These were partly offset by
productivity enhancements and reduced administrative costs.
Global Baking and Snacking:
This segment's sales decreased 1% to $564 million. The benefit of
3% from acquisition of the Kelsen Group, 3% rise in volume and mix
and a 2% increase in price and sales allowances, were more than
offset by a negative impact of 4% from unfavorable currency
exchange rates and 5% from higher promotional spending.
The segment's operating income decreased 7% year over year to
$68 million, primarily due to inflation and increased promotional
expenses, partly offset by higher selling prices, lower advertising
expenses and productivity enhancements.
International Simple Meals and Beverages:
Sales of this segment fell 17% to $186 million, primarily due to a
negative impact of 7% from currency translation, 6% from
unfavorable volume and mix, 1% from higher promotional expenses,
and 3% from accounting related costs in Mexico. The segment
witnessed sales decline in Latin America, Asia Pacific and
The segment's operating income of $27 million was down 4% from
the year-ago period mainly due to decreased volume partially offset
by lower selling and administrative expenses.
Bolthouse and Foodservice:
This segment comprises Bolthouse Farms and the North America
Foodservice businesses. This division's quarterly sales were $358
million, up 4% from the comparable year-ago quarter due to
favorable product and volume mix of 5% and 1% positive impact from
price and sales allowances.
Bolthouse Farms sales grew 6%, mainly on the back of
double-digit gain in premium refrigerated beverages and salad
However, due to cost inflation and increased promotional
expenditure the segment's operating income decreased 15% year over
year $23 million.
Due to continued pressure from cost inflation and unfavorable
foreign currency translations, the company has revised its sales
guidance for fiscal 2014. It expects sales from continuing
operations to increase 3% as against the previous projected range
Further, adjusted EBIT growth rate are now projected to remain
at the lower-end of the earlier guidance range of 4%-6%.
Similarly, Campbell expects adjusted earnings growth to be at
the lower-end of previously projected range of 2%-4% or $2.53-$2.58
per share. Currently, the Zacks Consensus Estimate for the fiscal
is pegged at $2.53 per share.
Other Stocks to Consider
Currently, Campbell Soup carries a Zacks Rank #2 (Buy). Some
other stocks which carry similar rank in the food space include
The Hain Celestial Group, Inc.
Pinnacle Foods Inc.
B&G Foods Inc.
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