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Nicholas Kitonyi
Nicholas Kitonyi
Articles (296)  | Author's Website |

Campbell Soup: Earnings Beat Expectations as Restructuring Takes Shape

Company's shares are up as turnaround plan yields first fruits

September 01, 2019 | About:

Campbell Soup Co. (NYSE:CPB)'s restructuring plan appears to be taking shape after the company’s most recent quarterly results beat expectations on earnings.

This sent the company’s stock soaring more than 9% to trade at $47.46 in the morning hours before pulling back in the afternoon session to settle at around $45.00 per share.

Campbell Soup Co. is a manufacturer and marketer of branded food and beverage products. The Camden, New Jersey-based firm operates through two main verticals including America’s simple meals and beverages that feature among other products, Campbell’s condensed and ready-to-serve soups, and snacks.

The meals and beverages and the snacks segments account for more than 90% of the company’s revenues. Meals and beverage sales grew by 1% in the most recent quarter while snacks posted a growth of 3%.

Recent quarter highlights

Campbell Soup reported its fiscal fourth quarter and full-year 2019 results on Friday pre-market with adjusted earnings per share (including Campbell International) coming in at 50 cents. Analysts were expecting the company to post an earnings per share of 41 cents.

Sales from continuing operations for the quarter increased by 2% to $1.8 billion year-over-year. Gross margin also impressed after increasing to 34% from 31.4% in the previous period. The company witnessed a significant increase in expenses, which affected the bottom line from continuing operations.

Marketing and selling expenses edged higher 10% to $195 million while administrative expenses soared 4%. The other expenses category nearly doubled in value during the quarter after rising to $128 million up from $66 million. This affected earnings from continuing operations with the company reporting a net loss of 2 cents per share.

Campbell’s full-year sales increased by 23% to $8.1 billion driven by the company’s new acquisitions, Snyder’s-Lance and Pacific Foods. EPS from continuing operations for the year was $1.57 and $2.03 after adjustments.

Cashflow from operations stood at $1.4 billion up from $1.3 billion. The company is already reaping the benefits from its multi-year cost-saving program which yielded $45 million in savings during the fiscal year 2019. This program also now utilizes synergies derived from the acquisition of Snyder’s-Lance.

Campbell is in the process of divesting international businesses after striking a deal to sell Campbell International and completing the divestiture of Campbell fresh. The company wants to focus on its two main operations in North America, which feature meals and beverages and snacks.

Its acquisitions, Snyder’s-Lance and Pacific Foods, will continually be integrated into the business model to create more synergies that will help to improve the bottom line in the coming years.

The company’s CEO, Mark Clause, is executing a transformational plan set in motion last year after pressure from activist investor Daniel Loeb (Trades, Portfolio) following a string of poor performances.

And based on the current progress, it appears that the restructuring plan is working and this could see the company build on fiscal 2019’s performance in the coming years.

In summary, shares of Campbell have spiked since the company’s most recent quarterly results came out. The company appears to be making progress in integrating last year’s acquisitions. It appears that there is a lot to look forward to in the coming years.

Disclosure: No position in the stocks mentioned.

About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

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