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Campbell (CPB) Stock Soars After Q4 Earnings Beat: What's Next for the Company?

Christopher Vargas

On Friday, Campbell CPB shares soared over 8% after the company reported strong Q4 results before the opening bell. The company has had a solid year thus far, rising over 42% year-to-date. The consumer staples company has benefited from the recent uncertainty that has plagued investors, sending them pouring into safer dividend yielding stocks. The consumer staples giant closed out their fiscal 2019 on a solid note and is looking to continue its success in the closing half of the year. Let’s delve deeper into the company and how our Zacks estimates have them performing in the near future.

Overview and Q4 Performance

The company is based out of Camden, New Jersey, and together with its subsidiaries, is a worldwide manufacturer and marketer of branded convenience food products. The company’s brands are sold in approximately 120 countries. Some of their most recognized brands include Campbell’s, Prego, Pepperidge Farm, V8, Swanson, and Pace.

In the third quarter of fiscal 2019, the company finalized the deal to sell off their Bolthouse Farms business as well as their Garden Fresh Gourmet business. After the transaction, Campbell now reports under the Meals and Beverages and Global Biscuits and Snacks segments. The company acquired Snyder’s-Lance last year, which has boosted its Global Biscuits and Snacks unit sales.

The company has been benefiting from its board-led strategy of undergoing robust cost saving initiatives such as increasing their focus on their Snacks segment and divesting underperforming units.

In Q4, Campbell reported earnings of $0.42 per share, beating our estimates by 2.44%. Revenues came in at $1.78 billion, missing our estimate by 11%. The company’s top line popped 2% and earnings were a whopping 96% surge from the year ago quarter. Campbell’s Meals and Beverages segment reeled in $813 million and its organic sales increased 1%. The hike in organic sales reflected strong performances form the company’s US soups, Prego sauces, and Pace Mexican sauces. The Snacks segment rose 3% Y/Y to $967 million and their organic sales rose 4%. Their strong organic sales reflected the continued growth in Pepperidge Farm bakery products, Goldfish crackers and a few other products.

What Lies Ahead?

Our consensus estimates call for earnings to rise 1.27% next quarter and for the company to bring in $2.47 billion, a 8.35% drop from the prior year’s quarter. The Meals and Beverages segment is expected to slip roughly 1% to $1.23 billion and Global Biscuits and Snacks is forecasted to total $1.22 billion in Q1 2020.

The company has introduced new soup recipes with added chicken and tomatoes and eliminated preservatives in order to appeal to the new health-conscious consumer landscape. The company’s initiatives to cut costs and focus on the aspects of their business that perform well have boded well for the company thus far. Selling certain segments of their business that were weighing down their bottom line helped catapult Campbell’s earnings in Q4.

Campbell is looking to turn things around, and if it continues to adhere its products to the conventional consumer and continues focusing on strengthening their snacks segment, then the company’s YTD run will likely increase.

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