Campbell Soup Company CPB has been benefiting from robust growth efforts, which have been boosting investors’ optimism. Notably, shares of the company have gained 26.7% in the past year against the industry’s decline of 14%. Also, the stock comfortably outperformed the Zacks Consumer Staples sector that has fallen 17.1% in the same time frame.
Meanwhile, sources suggest that Campbell Soup has been recently seeing increased demand for some of its staple products from store and online retailers. Incidentally, customers are hoarding products amid growing coronavirus scare. If the demand surge continues, it is most likely to aid Campbell Soup’s sales. For now, let’s delve deeper into the growth drivers of this convenience food products provider.
Focus on Key Businesses in North America
Campbell Soup has been focused on improving the performance of its Campbell Snacks and Campbell Meals and Beverages segments in the key North American market. The company exited its non-core businesses, as part of which it concluded the divestiture of Campbell International division in December 2019. Also, Campbell Soup offloaded its Campbell Fresh segment in June 2019.
Strength in Snacks Business
Campbell Soup is benefiting from its fast-growing Snacks business, which formed more than 40% of the company’s top line in the second quarter of fiscal 2020. In this regard, Campbell Soup’s buyout of Snyder's-Lance (concluded in the third quarter of fiscal 2018) is enhancing its performance. Markedly, organic sales in the Snacks division improved 2% in the second quarter of fiscal 2020. The segment gained from advancements in Pepperidge Farm cookies, Kettle Brand, Goldfish crackers and Cape Cod. We believe that brands under the snacking category will continue boosting performance, backed by enhanced marketing and innovation.
Savings Plan Bodes Well
Campbell is progressing well with its cost savings plan. The company’s strategy of concentrating on supply-chain efficiencies, along with curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. During the second quarter, Campbell generated savings worth $45 million as part of its multi-year, cost-saving program, which included synergies associated with the Snyder’s-Lance buyout. Management anticipates generating cumulative annualized savings from continuing operations of $850 million by fiscal 2022 end.
All said, we believe that this Zacks Rank #2 (Buy) stock will continue to be in investors’ good books.
Other Consumer Staples Picks
The Hain Celestial Group, Inc. HAIN, with a Zacks Rank #2, has trailing four-quarter positive earnings surprise of nearly 7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Flowers Foods, Inc. FLO, with a Zacks Rank #2, has trailing four-quarter positive earnings surprise of 2.2%, on average.
e.l.f. Beauty Inc. ELF with a Zacks Rank #2, has trailing four-quarter positive earnings surprise of 62.5%, on average.
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(We are reissuing this article to correct a mistake. The original article, issued on Apr 2, 2020, should no longer be relied upon.)
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