Campbell Soup (CPB) Reports a Mixed Fourth Quarter

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.

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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 Campbell Soup's Tasty Fourth-Quarter Earnings Campbell Soup reports robust earnings, but investors aren't impressed. Campbell Soup's 4Q Earnings Beat Estimates Campbell Soup tops earnings. Other Stocks in the News A Closer Look at the Controversial Market Growth of ADHD Treatments What's the truth behind rising sales of ADHD treatments? UnderstandingtheMassiveMarketPotentialofMonoclonalAntibodies Will these drugs eliminate chemotherapy? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Sep 3, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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