We retained our long-term Neutral recommendation on high-quality
foods and simple meals manufacturer
Campbell Soup Company
) as we remain impressed by the company's strategic initiatives to
boost its top line and return on investment. In our view, these
initiatives will set a platform for profitable growth in the long
term. However, we expect to see more color on the success of these
initiatives and thus remain on the side lines for the time being.
For some time now, Campbell has been working hard to augment its
new strategic framework, primarily focused on brand expansion.
During the first three quarters of 2012, the company made
significant progress in this direction, which includes
stabilization of the North American soup and simple meal business,
overseas expansion, and growth of healthy beverages and baked
snacks business. The company has launched 52 new products so far in
fiscal 2012 while emphasizing on brand advertisement and consumer
Additionally, we believe 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
In the recent quarter, Campbell managed to beat the Zacks Consensus
Estimate. The company's earnings per share of 56 cents per share
surpassed the Zacks Consensus Estimate of 52 cents. Net sales of
$1,821 million also came ahead of the Zacks Consensus Estimate of
Looking ahead, Campbell retained its fiscal 2012 guidance,
targeting sales growth in the flat to 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
CAMPBELL SOUP (CPB): Free Stock Analysis Report
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Though Campbell has shown significant progress with the product
launches, there remains risk of consumer acceptance attached to it.
This brings in uncertainty regarding the time when gains from these
launches will be reflected in the company's top line. Further, it
remains to be seen how far the company's innovations will
compensate for the company's recent strained performance in the
condensed and ready-to-serve soup categories.
Moreover, Campbell 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.
H. J. Heinz Co.
). This may dent the company's performance.
Currently, Campbell Soup has a Zacks #3 Rank, implying a short-term
Hold rating on the stock.