Sales at Campbell Soup may fall this year, but investors shouldn’t be alarmed.
When Campbell (ticker: CPB) reported its fiscal first-quarter results after the market close Tuesday, the Camden, N.J., soup company said it now expects net sales to be down 1% to up 1% from a year earlier. That’s after Campbell had earlier predicted a sales increase of 1% to 3% for the fiscal year that started Aug. 1.
Campbell shares rose 0.9% Wednesday morning, while the S&P 500 increased 0.7%.
There are a few reasons Campbell’s report looks good beyond the downgraded sales forecast. For one thing, the updated guidance largely reflects Campbell’s recently completed sale of its European chips business.
Second, sales of U.S. soup fell 3% from a year earlier, an improvement from the 6% decline in the previous year’s quarter. This is notable because as part of its turnaround plan, new management has been trying to fortify the company’s soup portfolio and soup market share grew for the first time in 10 quarters, says Wells Fargo analyst John Baumgartner.
Moreover, sales were hurt by the late Thanksgiving holiday, when many Americans buy broths and condensed soups called for by Thanksgiving recipes like green-bean casserole.
As for earnings, Campbell posted adjusted per-share earnings of 78 cents, better than the 71 cents analysts polled by FactSet predicted. And analysts like the company’s cost-savings efforts, which amounted to $45 million in the latest quarter. The company has said it will shave costs by $850 million by fiscal 2022 and Baumgartner sees upside to that target.
Campbell’s stock has been on a tear this year, up 48% to $48.57 as of Wednesday morning. Baumgartner suggests investors hold shares, saying that he sees risks and rewards balanced over the next 12 months.
Write to Lisa Beilfuss at lisa.beilfuss@dowjones.com
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December 04, 2019 at 11:37PM
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Campbell Soup Cuts Sales Outlook, but Its Turnaround Looks on Track - Barron's
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