Markets
FLO

Do Campbell's Initiatives Position it for Sustained Growth?

A generic image of a pen, a calculator and papers
Credit: Shutterstock photo

Convenience food products manufacturer and seller, Campbell Soup CompanyCPB has been showing strength on the back of its recent portfolio reorganization and cost-cutting initiatives, which are likely to enhance overall execution, boost financial results and drive growth. Shares of the company have jumped over 10% year-to-date.

Further, Campbell delivered an earnings beat in all four quarters of fiscal 2015 which confirms a positive earnings trend. The company's positive average surprise stands at 6.7%. In the fourth quarter, the company's earnings surpassed the Zacks Consensus Estimate and its gross margin expanded despite currency headwinds. The improvement in the gross margin resulted from better pricing, lower promotional activity and enhanced productivity. Also, management issued its outlook for fiscal 2016 which complements Campbell's long-term targets.

In order to enhance its brand portfolio and accelerate future growth, Campbell remains focused on acquisitions and joint ventures. The company acquired leading refrigerated salsa maker, Garden Fresh Gourmet in fiscal 2015, which is in line with the company's aim to expand its packaged fresh and organic foods categories.

Prior to this, the company acquired three growth engines in fiscal 2014, including the CPG portion of Bolthouse Farms, Plum Organics and the Kelsen Group, which provide for combined annual sales of nearly $1 billion. Further, its entry into joint ventures with Grupo Jumex and Conservas La Costena in Mexico enhanced its manufacturing and distribution capabilities along with expanding its presence in the global market.

Also, Campbell enjoys a healthy financial status with cash flow from operations of $1.2 billion in fiscal 2015, which exceeded its expectation of $1.1 billion, representing a 31.5% year-over-year rise. The robust operating cash flow provides the company with financial flexibility to drive future growth, enabling it to sponsor the development of fast-growing businesses, incur capital expenditures and return excess cash to shareholders. In fiscal 2015, Campbell incurred capital expenditure of $380 million, related to capital projects. Moreover, the company repurchased shares worth $244 million and paid dividends of $394 million, which reflect its commitment toward shareholders.

However, adverse currency movements continued to weigh on Campbell's top line that fell short of expectations in the recent quarter. Both the Australian and Canadian dollars (Campbell's main international currencies) continued to weaken against the U.S. dollar, which in turn weighed on the company's sales by three percentage points. Moreover, the company expects these headwinds to linger in fiscal 2016 and impact results.

Also, the food industry is vulnerable to shifts in consumer preferences, which remains a concern. In addition, rising commodity prices may undermine the company's future performance.

Nonetheless, Campbell currently holds a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other favorably ranked stocks in the same industry include Cal-Maine Foods Inc. CALM and Omega Protein Corporation OME , both carrying a Zacks Rank #1 (Strong Buy), as well as Flowers Foods Inc. FLO with a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CAMPBELL SOUP (CPB): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

FLOWERS FOODS (FLO): Free Stock Analysis Report

OMEGA PROTEIN (OME): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

FLO CALM CPB

Other Topics

Stocks

Latest Markets Videos