Campbell Soup Stays Neutral - Analyst Blog
January 03 2013 - 10:20AM
Zacks
Campbell Soup
Company (CPB) has remained successful in increasing its
profitability through continued focus on brand expansion and
effective cost management. However, we have maintained our
long-term ‘Neutral’ recommendation on the stock as we remain
slightly cautious due to rising input costs and intense
competition.
Campbell recently reported its
first-quarter fiscal 2013 results (ended October 2012).In
accordance with its strategy of brand expansion and cost
management, Campbell once again reported better-than-expected
bottom-line results. The company’s quarterly earnings of 88 cents
per share were 7.3% higher than the year-ago quarter’s earnings and
were also ahead of the Zacks Consensus Estimate of 85 cents.
Further, Campbell continues to
anticipate a sales growth in the range of 10%–12% and earnings
between $2.51 and $2.57 per share in fiscal 2013.
Going forward, the company’s
Bolthouse acquisition will prove to be accretive to its fiscal 2013
top and bottom lines. In addition, the company intends to boost its
top line and increase return on investment through a new strategic
framework, primarily focusing on brand expansion, and launch nearly
50 new products in fiscal 2013 while emphasizing on brand
advertisement and consumer promotional activities.
We believe that Campbell’s prudent
investment and strategic initiatives toward product innovation and
brand building will increase its customer base and profitability.
Moreover, the company’s continuous focus on research and
development, to further differentiate its higher-margin sauce
brands, will strengthen its competitive position in the
international market.
On the flip side, rising commodity
costs, intense competition from other established players and
exposure to unfavorable foreign currency fluctuations may undermine
the company’s growth prospects.
Due to its high exposure to
international market, Campbell Soup remains prone to currency
fluctuations, which is a major reason for continuous decline in its
International Simple Meals and Beverages segment. Sales at this
segment dipped 1.0% to $354.0 million in the first quarter 2013,
primarily due to 1% decline in volume and mix and 3% negative
impact from currency translation.
Moreover, Campbell operates in a
highly-competitive food industry and experiences worldwide
competition in all its principal products from well-established
rivals like General Mills and H. J. Heinz, which may dent its
performance going forward.
The above analysis supports our
unbiased view on the stock. Campbell bears a Zacks #3 (Hold) Rank,
while its prime competitors General Mills, Inc.
(GIS) and H. J. Heinz Company (HNZ) carry Zacks #2
(Buy) and Zacks #3 (Hold) Ranks, respectively.
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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