Campbell Soup (CPB, Financial) released the financial results for its second quarter of fiscal 2021 on March 9 before the market opened. While earnings beat Zacks Consensus estimates, revenue fell short of projections.
Snapshot of the quarter
The American processed food and snack company posted adjusted earnings per share of $0.84 (up 17% year-over-year), which was higher than analyst estimates of 83 cents. Revenue of $2.28 billion was up 5% on a year-over-year basis but was below analysts' projections of $2.3 billion.
The gross margin increased to 34.4%. 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.
President and CEO Mark Clouse commented the following on the company's performance:
"We delivered another quarter of strong results, with top-line growth in both segments—partly tempered by foodservice and supply constraints caused by COVID-19—as well as continued growth in EBIT and EPS. In addition, nearly 75% of our brands grew or held share which was an important goal for the quarter. Given this strong performance, we are providing full-year fiscal 2021 guidance and we are confident in the long-term growth potential of Campbell."
Segment performance
In the Meals and Beverages segment, net sales grew 6% 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. Within the segment, U.S. soup saw sales rise 10%, driven primarily by gains in condensed soups, ready-to-serve soups and broth. Operating profit in the segment was up 7%, positively impacted by sales volume gains and improved gross margin performance.
Sales in the snacks segment increased 4%. The company benefitted from robust sales of fresh bakery products, Pepperidge Farm cookies, Kettle Brand and Cape Cod potato chips and Snack Factory Pretzel Crisps. Goldfish crackers witnessed flat sales during the quarter. The segment's operating profit inched up 6%. The increase was primarily due to lower selling costs and higher sales volume, partially negated by higher administrative expenses and marketing overheads.
Financials and dividend
At the end of first quarter, the company had cash and cash equivalents of $946 million and long-term debt of $6 billion.
The company earned $431 million in cash from operating activities during the fiscal second quarter.
The Board of Directors of the company declared a quarterly dividend of 37 cents per share, which will be payable to the shareholders on May 3.
Financial forecast
Campbell has provided guidance for full-year fiscal 2021. The company foresees its sales to decline in the 3.5% to 2.5% range. This excludes the impact of the divested European chips business. Adjusted EPS is predicted to fall within the range of $3.03 to $3.11.
Disclosure: I do not hold any positions in the stocks mentioned.
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