Campbell Soup Just Beats - Analyst Blog
May 23 2011 - 11:17AM
Zacks
Campbell Soup Co. (CPB) reported fiscal 2011
third-quarter adjusted earnings of 57 cents per share, beating the
Zacks Consensus Estimate of 52 cents a share and year-ago results
of 54 cents per share.
Campbell’s net sales during the quarter increased by 1.0% year
over year to $1,813 million, marginally beating the Zacks Consensus
Estimate of $1,811 million. The increase was primarily the result
of a 2% spike in price and sales allowances and favorable currency
translations of 2%, partially offset by a negative impact from
volume and mix of 2%.
Segment Analysis
Sales at the U.S. Soup, Sauces and Beverages division fell 8%
year over year to $778 million as sales of condensed,
ready-to-serve soups, broth and beverage sales declined 2%, 15%, 2%
and 9%, respectively.
Campbell’s Baking and Snacking segment posted a sharp growth of
10% year over year to $527 million, mainly due to favorable
currency translations, increased volume and pricing, partially
offset by higher promotional spending. The company witnessed higher
sales of cookies and crackers, and a good performance at Pepperidge
Farm.
The International Soups and Sauces segment also recorded a 7%
sales growth to $354 million mainly due to higher sales in Europe,
Asia-Pacific and Canada along with volume gains and favorable
currency impact. However, the increase in segment sales was
partially offset by increased promotional spending.
North America Foodservice division’s quarterly sales grew 5%
year over year to $154 million. The increase was primarily
attributable to higher volumes, decreased promotions and favorable
foreign exchange rates, partially offset by a negative impact from
pricing.
Operating Metrics
During the quarter, Campbell’s gross margin contracted 80 basis
points (bps) to 40.4% from 41.2% in the year-ago period, primarily
due to an increase in plant cost and cost inflation, partially
offset by productivity improvements.
Operating income increased 1% to $307 million also due to
decrease in selling and marketing expenses and administrative
expenses coupled with a favorable impact from currency, partially
offset by the decrease in gross margin and reduction in sales
volumes.
Financials
Campbell ended the quarter with cash and cash equivalents of
$449 million. Quarter-end long-term debt was $2.43 billion. Year to
date, the company generated $858 million of cash from operations.
The company bought back 20 million shares for a total cost of $696
million.
Guidance
Looking ahead, Campbell expects sales to decline-to-increase in
a (1%) to 1% band in fiscal 2011. The company forecasts adjusted
earnings for the fiscal to decline at a clip of 1% to 3%.
Campbell Soup is one of the world’s leading manufacturers of
convenience food products. The company’s diversified portfolio of
well-established brands -- including Campbell’s, Erasco, Liebig,
Pepperidge Farm, V8, Pace, Prego, Swanson and Arnott’s -- offer a
competitive edge, strengthening its well-established position in
the market.
However, Campbell Soup operates in the highly competitive food
industry and experiences worldwide competition in all of its
principal products from such well-established rivals such as
General Mills Inc. (GIS), HJ Heinz
Co. (HNZ) and Del Monte Foods Co. (DLM).
Consequently, the company is under severe stress to maintain its
operating performance
We currently have a short-term Zacks #3 Rank (Hold) rating and a
long-term Neutral recommendation on the company.
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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