Shares of Campbell Soup (CPB) slid last week, after the processed foods maker reported mixed earnings that showed solid bottom line growth offset by top line weakness. For its fourth quarter, Campbell Soup’s earnings per share rose 10% to $0.45, topping the consensus estimate by three cents per share. Revenue climbed 13% year-on-year to $1.72 billion, but fell short of the $1.83 billion that analysts had been expecting.
13% of Campbell Soup’s top line gain was fueled by acquisitions, 1% was attributed to positive volume and mix, and price and sales allowances added another 1%. However, increased promotional spending and currency impacts reduced each increase by 1%.
Better cost controls kept marketing and sales expenses flat year-on-year at $191 million. Campbell Soup reduced advertising and promotion costs during the quarter to offset expenses related to its Bolthouse Farms acquisition. Although Campbell Soup applied tighter cost controls during the quarter, its adjusted gross margin still declined 230 basis points to 36.7%, primarily due to the lower margin Bolthouse Farms business. Adjusted gross profit, however, rose 7% on dollar terms. Adjusted operating margin also fell 160 basis points to 12.1% from the previous year.
The company’s largest business segment, Global Baking and Snacking, reported a 3% gain in revenue to $570 million, as its operating income increased 1% to $84 million. Campbell Soup’s second largest segment, U.S. Simple Meals, reported a 7% gain in sales to $493 million, which was aided by the acquisition of Plum Organics. Sales of non-condensed soups and sauces remained strong. Operating income at the segment rose 6%.
Campbell’s beverage business, best known for its V8 vegetable drinks, reported a 4% decline in sales to $173 million, continuing a series of declines in the struggling segment. Operating income at the segment plunged 20% to $20 million. Sales at its International Simple Meals and Beverages also declined 7% as its operating income dropped 22%. Bolthouse Farms, which it acquired last August, was combined with its North America Food Service business, which reported quarterly sales of $300 million.
For Campbell Soup, which is up more than 20% over the past twelve months, it’s the same old story — robust sales of packaged foods, soups, and sauces being offset by poor sales of beverages and international products. The stock currently trades at 15 times forward earnings with a 5-year PEG ratio of 2.6, indicating a fair valuation with sluggish earnings growth ahead. The stock pays a quarterly dividend of $0.29 per share — a 2.68% yield at current prices.
Other News About CPB
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