Campbell Struggles, Yet Beats EPS - Analyst Blog

By Zacks Equity Research,

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High-quality foods and simple meals manufacturer Campbell Soup Company ( CPB ) reported a 10% decline in adjusted earnings per share for the second-quarter 2012.

The quarterly earnings of 64 cents per share, however, surpassed the Zacks Consensus Estimate of 62 cents.

During the quarter, net sales inched down 1% from the prior-year quarter to $2,112 million, missing the Zacks Consensus Estimate of $2,116 million by $4 million. The decrease was primarily due to a negative impact from volume and mix of 3% and a 1.0% increase in promotional spending, partially offset by a 3% spike in price and sales allowances.

Segment Analysis

U.S. Simple Meals:   Second quarter sales at the U.S. Simple Meals division fell 2% year over year to $824 million, primarily due to a 5% decline in volume and mix, offset by a 3% rise in price and sales allowances. Sales of U.S. Soup dropped 2% as sales of ready-to-serve soups plummeted 12%, offset by a 5 % increase in condensed soups and a 3% spike in broth sales. Sales at U.S. Sauces dipped 2%, including a 7% decline in Pace" Mexican sauces, offset by a 6% rise in "Prego" pasta sauce.

U.S. Beverages: Sales at the U.S. Beverages division rose 4% year over year to $187 million, due to a 2% rise in volume and mix and a 1% surge in price and allowances, offset by a 1% increase in promotional spending.

Global Baking and Snacking: Campbell's Global Baking and Snacking segment posted flat year-over-year sales of $526 million. The flat results were attributable to a 5% rise in price and allowances and a 1% positive impact from currency translation, offset by a 4% drop in volume and mix and a 2% increase in promotional spending.

International Simple Meals and Beverages: Sales at International Simple Meals and Beverages declined 5% to $402 million, primarily due to lower sales and volumes in Europe and Canada along with unfavorable volume and mix, increased promotional spending and negative currency translation effect. However, this was partially offset by increased sales in the Asia Pacific region and favorable price and sales allowances.

North America Foodservice: The North America Foodservice division's quarterly sales grew 9% year over year to $173 million. The increase was primarily attributable to higher volumes in fresh chilled soup sold at retail along with favorable volume and mix, as well as price and sales allowances.


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.

Looking ahead, Campbell plans to boost its topline by a new strategic framework, which is primarily focused on brand expansion. The company's second quarter release highlighted that the company continues to make significant progress in stabilizing overall U.S. Soup profits, through substantial investment to fund brand-building efforts and a step change in innovation. We believe this should position the company for future success.

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. ( GIS ) and H. J. Heinz Co. ( HNZ ). This may dent the company's performance.

Currently, Campbell Soup has a Zacks #4 Rank, implying a short-term Sell 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CPB , GIS , HNZ

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