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Campbell (CPB) Beats on Q3 Earnings, Reaffirms FY23 View

Campbell Soup Company CPB reported impressive third-quarter fiscal 2023 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. While its top line increased year over year, its bottom line declined. The results benefited from favorable net price realization and brand strength, partially offset by higher cost inflation and other supply chain costs.

Management reaffirmed its fiscal 2023 net sales, adjusted earnings before interest and taxes (EBIT) and adjusted earnings per share (EPS) outlook, which also reflects planned investments in the next quarter.

Quarterly Highlights

Adjusted earnings decreased 3% year over year to 68 cents per share due to lower adjusted EBIT and higher adjusted effective tax rates. The metric surpassed the Zacks Consensus Estimate of 64 cents.

Net sales of $2,229 million increased 5% year over year and surpassed the Zacks Consensus Estimate of $2,219 million. Organic net sales grew 5% year over year. The upside can be attributed to favorable inflation-induced net price realization, somewhat offset by soft volume/mix.

The company’s adjusted gross profit rose to $689 million from $671 million reported in the year-ago quarter. Adjusted gross profit margin contracted 60 basis points (bps) to 30.9% on unfavorable volume/mix, ongoing cost inflation and increased other supply chain costs. These were somewhat offset by favorable net price realization and supply chain productivity improvements.

Adjusted EBIT declined 2% to $313 million owing to higher marketing and selling expenses and adjusted administrative expenses.

Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company Price, Consensus and EPS Surprise
Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company price-consensus-eps-surprise-chart | Campbell Soup Company Quote

Segmental Analysis

Meals & Beverages: Net sales decreased 2% year over year to $1,108 million. Organic sales fell 1%, mainly due to declines in U.S. soup, partially offset by gains in foodservice. Favorable net price realization was more than offset by volume/mix declines. Sales of U.S. soup decreased by 11%. Operating earnings in the unit declined 17%, primarily due to reduced gross profit.

Snacks: Net sales in the division rose 12% (also organically) to $1,121 million. The upside can be attributed to sales of power brands, which rose 16%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers, Lance sandwich crackers and salty snacks like Kettle Brand potato chips, among others. Favorable net price realization contributed to the upside, which was partially offset by volume/mix declines. Segmental operating earnings increased by 41%, driven by increased gross profit.

Other Financial Details

As of Apr 30, 2023, Campbell's total cash and cash equivalents stood at $223 million, long-term debt was $4,496 million and total equity amounted to $3,588 million. CPB generated $918 million in cash flow from operations for the nine months ended Apr 30, 2023. Capital expenditures amounted to $257 million in the said period.

Management paid $336 million in cash dividends and bought back nearly $141 million during the first nine months of fiscal 2023. At the end of the third quarter, it had nearly $301 million remaining under its current $500-million share repurchase plan and almost $104 million remaining under its $250 million anti-dilutive share repurchase plan.

In the reported quarter, the company generated $880 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies. Management remains on track to deliver savings worth $1 billion by fiscal 2025-end.

Fiscal 2023 Guidance

For fiscal 2023, the company reaffirmed its financial outlook. It expects 8.5-10% net sales and organic sales growth for fiscal 2023. Adjusted EBIT is forecast to be up 4.5-6.5%. Adjusted EPS is envisioned to be up 3.5-5% to come in at $2.95-$3.00.

Shares of the Zacks Rank #3 (Hold) company have lost 4.8% in the past six months against the industry's growth of 5.9%.

3 Red-Hot Stocks

Some top-ranked stocks are Tecnoglass TGLS, Skechers U.S.A., Inc. SKX and Nomad Foods Limited NOMD, all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.

Skechers is a worldwide producer and distributor of footwear for men, women and children.

The Zacks Consensus Estimate for Skechers’ current financial-year sales suggests growth of 7.8%, while earnings per share are expected to rise by 31.9% from the corresponding year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 18.8%, on average.

Nomad Foods manufactures and distributes frozen foods. The company has a trailing four-quarter earnings surprise of 8.5%, on average.

The Zacks Consensus Estimate for NOMD’s current financial year sales suggests growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.

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