Campbell Soup (CPB, Financial) released its financial results for its fiscal third quarter of 2020 on June 3 before the market opened. While the company’s earnings beat Zacks Consensus estimates, revenue fell short of predictions.
Snapshot of the quarter
The American processed food and snack company posted earnings per share of 83 cents (up 57% year-over-year), which was higher than analyst estimates of 76 cents. Revenue of $2.24 billion was up 15% on a year-over-year basis but missed analysts’ projections by 1.78%.
Reflecting on the quarter, Campbell’s President and CEO Mark Clouse commented:
“In the quarter, we experienced unprecedented broad-based demand across our brands as consumers sought food that delivered comfort, quality and value. This demand resulted in double-digit increases in organic sales, adjusted EBIT and adjusted EPS. In addition, Campbell’s products were purchased by millions of new households, with total company household penetration increasing over 6 percentage points in the quarter compared to the third quarter of fiscal 2019.”
The adjusted gross margin increased to 34.7%. This was largely driven by favourable product mix coupled with improved operating leverage. Supply chain and cost saving measures also helped. This was only partly negated by higher costs and other supply chain expenses.
Segment performance
In the Meals and Beverages segment, net sales grew 20% compared to the prior-year quarter. The company benefitted from strong U.S. retail business and gains in Canada. This was partially offset by the decline in the foodservice business due to shelter-at-home orders and social distancing. The U.S. soup segmnet saw sales rise 35%, driven primarily by gains in condensed soups, ready-to-serve soups and broth. Operating profit in the segment was up 25%.
Sales in the snacks segment increased 9%. The company benefitted from robust sales of fresh bakery products, Pepperidge Farm cookies, Kettle Brand and Cape Cod potato chips, Lance sandwich crackers and Snack Factory Pretzel Crisps. Operating profit surged 19%.
Guidance
Campbell has raised its guidance for fiscal 2020. The company now foresees its sales to grow 5.5% to 6.5%, which excludes the impact of the divested European chips business.
The company has provided adjusted EPS guidance of $2.87 to $2.97, which exceeds its previous guidance of $2.55 to $2.60.
Disclosure: I do not hold any positions in the stocks mentioned.
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