Campbell Soup Company CPB scaled a new 52-week high of $53.31 last Friday, before closing trade a notch lower at $53.10, reflecting a roughly 23.9% surge year to date. The stock’s solid run at the index came after the company’s better-than-expected first-quarter fiscal 2016 results, accompanied by encouraging earnings guidance.
Campbell Soup reported robust first-quarter fiscal 2016 results, wherein both the top and the bottom lines beat the respective Zacks Consensus Estimate. The company’s adjusted earnings from continuing operations of 95 cents per share were way ahead of the Zacks Consensus Estimate of 76 cents and increased 22% from the prior-year quarter. Net sales fell nearly 2% to $2,203 million from $2,255 million in the prior-year quarter, but surpassed the Zacks Consensus Estimate of $2,201 million.
Further, the company raised its adjusted earnings per share guidance for fiscal 2016 to $2.75–$2.83, reflecting growth of 4% to 7% from $2.65 reported in fiscal 2015. Earlier, the company had projected earnings per share growth of 3–5%.
Apart from this, the company’s strategic initiatives also lent support to the stock. We note that this manufacturer of branded convenience food products, remains focused on enhancing its bottom line, increasing return on investment through strategic frameworks, overseas expansion, and growth of healthy beverages and baked snacks.
Further, with a view to synchronize its organizational structure and key growth strategies, Campbell Soup realigned its reporting segments from five to three, effective first-quarter fiscal 2016. With this reorganization, the company aims to craft a meaningful scale, and establish clearly defined portfolio roles and growth targets, which will be linked to each segment’s function in the organization and opportunities in the marketplace.
Additionally, the company has adopted a major cost savings initiative that comprises streamlining of organization, launch of Integrated Global Services and the initiation of zero-based budgeting in fiscal 2016. The entire initiative is likely to generate cost savings of $200–$250 million over a period of three years.
Moreover, in an attempt to enhance its brand portfolio and accelerate future growth, Campbell Soup has resorted to acquisitions and joint ventures. In this regard, the company acquired leading refrigerated salsa maker, Garden Fresh Gourmet in fiscal 2015. The acquisition, which makes Garden Fresh Gourmet part of Bolthouse Farms (acquired in fiscal 2014), is in line with the company’s aim to expand its packaged fresh and organic foods categories.
Considering the above factors, we remain optimistic about the company’s future performance, which is well reflected in its Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Other favorably placed stocks in the same sector are Omega Protein Corporation OME, B&G Foods Inc. BGS and The Chefs' Warehouse, Inc. CHEF. Each of these three stocks also carries a Zacks Rank #1.
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