We retain our long-term Neutral recommendation on
Campbell Soup Company
(
CPB
). We remain encouraged by the company's efforts to boost its top
line through its focus on brand expansion. However, we remain on
the sidelines given the company's earnings and sales miss in the
recent quarter compared to last year.
Campbell's second-quarter 2012 earnings of 64 cents per share
dropped 10% compared to the year-ago quarter, but surpassed the
Zacks Consensus Estimate by a couple of 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.
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.
During the first half of 2012, the company made significant
progress in the direction of its strategic plan to boost its top
line and increase return on investment, with primary focus on brand
expansion. The company's plan mainly includes three core
strategies: stabilization of the North American soup and simple
meal business, overseas expansion, and growth of healthy beverages
and baked snacks business.
Moreover, Campbell's strategy is focused on bringing innovation
across its portfolio while sketching a growth plan based on
consumer expectations. As a result, the company launched 27 new
products in fiscal 2012 while emphasizing on brand advertisement
and consumer promotional activities.
We believe Campbell's prudent investment and strategic
initiatives toward product innovation and brand building will boost
its customer base as well as 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.
However, rising commodity costs, intense competition from other
established players and exposure to unfavorable foreign currency
fluctuations may undermine the company's future growth
prospects.
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.
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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