Campbell Soup Company CPB appears to be a lucrative bet, more so after it reported third-quarter fiscal 2019 results last week. Notably, this convenience food products company has gained 10.2% in less than a week. Also, Campbell’s shares have rallied almost 20% in the past three months, outpacing the industry’s growth of 6.6%.
Let’s delve deeper into the factors that are likely to keep driving this Zacks Rank #2 (Buy) stock.
Q3 Reflects Focus on Board-Led Strategy & Portfolio Review
Campbell is taking various important actions to enhance performance and boost shareholders’ value. These actions form part of the company’s portfolio review and Board-led strategy. Markedly, Campbell plans to bring focus on two separate businesses in its key North American market — Campbell Snacks, and Campbell Meals and Beverages. Earlier, the company had unveiled intentions to divest non-key businesses — Campbell International and Campbell Fresh. Keeping in these lines, Campbell inked a deal to sell the Bolthouse Farms business, and completed the sale of U.S. refrigerated soup and Garden Fresh Gourmet businesses during the third quarter of fiscal 2019. Consequently, the Campbell Fresh segment is now reported as discontinued operations.
Also, management made adjustments to its fiscal 2019 outlook, in order to reflect the impact of the divestitures. Adjusted EBIT is expected to be $1,390-$1,410 million compared with the earlier view of $1,370-$1,410 million. Adjusted earnings per share are envisioned to be $2.50-$2.55 compared with the earlier projection of $2.45-$2.53.
Solid Snacks Category
Strengthening the presence of its growing snacks brands is part of Campbell’s core strategies. Thus, the company is committed toward shifting its overall portfolio to the fast-growing snacking category, which is expected to form about half of its proforma sales in future. Markedly, Campbell acquired Snyder's-Lance in the third quarter of fiscal 2018, which is enhancing the performance of the global biscuits and snacks portfolio. Going ahead, management expects brands under the snacking category to continue boosting performance, backed by enhanced marketing and innovation.
Cost Savings on Track
Campbell is progressing well with its cost-savings plan, which was announced in fiscal 2015. The company’s strategy of concentrating on supply-chain efficiencies along with curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. During the reported quarter, Campbell generated savings worth $55 million as part of its multi-year, cost-savings program, which included synergies associated with Snyder’s-Lance’s buyout. This takes its savings from the program to $605 million. The company now expects to generate cost savings of about $180 million in fiscal 2019, including savings from C-Fresh.
These factors along with Campbell’s efforts toward product innovation and brand building, and focus on buyouts are likely to continue fueling profitability. All said, we expect the company to keep its solid momentum alive and continue spicing up investors’ portfolio.
Looking for More? Check These Food Stocks Now
General Mills GIS, with a Zacks Rank #2, has a long-term EPS growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Flowers Foods FLO, also with a Zacks Rank #2, delivered back-to-back surprises in the last two quarters.
J&J Snack Foods JJSF, with a Zacks Rank #2, also delivered back-to-back surprises in the last two quarters.
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