Campbell Soup Company (CPB), the manufacturer of branded convenience food products, remains focused on enhancing its top line and increase return on investment through strategic frameworks, including the stabilization of North American soup and simple meal business, overseas expansion as well as growth of the healthy beverages and baked snacks businesses.
We believe that Campbell’s prudent investment and strategic efforts toward product innovation and brand building will lead to an increase in its customer base and profitability.
Further, the company has resorted to acquisitions and joint ventures in order to enhance its brand portfolio and accelerate future growth. As a result, the company acquired three new growth engines in fiscal 2014 including Bolthouse Farms, Plum Organics and the Kelsen Group, which provide for combined annual sales of nearly $1 billion.
With regard to join ventures, Campbell’s entry into joint ventures with Grupo Jumex and Conservas La Costena in Mexico has enhanced its manufacturing and distribution capabilities along with its presence in the global market.
Additionally, we remain optimistic about the company’s decision to step away from its troubled canned soup business and focus on capturing the packaged fresh food market in order to cater to the demands of its customers and keep up with the current trends.
Moving on, we are impressed with this Zacks Rank #3 (Hold) company’s robust first-quarter fiscal 2015 results, wherein both top and bottom lines improved year over year and beat the Zacks Consensus Estimate.
The company’s adjusted earnings of 74 cents per share grew 12% year over year and came a penny ahead of the Zacks Consensus Estimate mainly benefiting from strong revenue growth along with its brand expansion and cost containment strategies. Net sales increased 4% to $2,255 million and surpassed the Zacks Consensus Estimate of $2,222 million.
However, we remain skeptical about the company’s future performance due to the lowered fiscal 2015 guidance. Despite concluding first-quarter fiscal 2015 strongly, the company reduced the low-end of its fiscal 2015 sales, adjusted EBIT and adjusted earnings per share guidance mainly to reflect the negative impact from currency translation.
Other factors that keep us on the sidelines include the rising commodity costs, intense competition and exposure to foreign currency fluctuations, which may undermine the company’s performance.
Other Stocks to Consider
Other better-ranked retail stocks include Aramark (ARMK), sporting a Zacks Rank #1 (Strong Buy), The Hain Celestial Group, Inc. (HAIN) and United Natural Foods, Inc. (UNFI), each carrying a Zacks Rank #2 (Buy).
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