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Campbell Soup Cools Down After Q3 2014 Earnings Results

Eric Niederer

Campbell Soup (NYSE: CPB) shares are about even in Tuesday's trading.

Morgan Stanley maintained an Underweight rating, while Credit Suisse downgraded the stock from Neutral to Underperform.

Campbell took a hit on Monday dropping nearly six percent from the previous close to open at $42.55 after releasing worse-than-expected third quarter 2014 results. Campbell's President and CEO Denise Morrison commented, "While we delivered growth in third-quarter earnings, our organic sales growth of 1 percent reflected mixed performance and fell short of our expectations."

Morrison continued, "I am disappointed that our plans did not drive stronger sales results in U.S. Soup."

Responding to these earnings results, both Credit Suisse and Morgan Stanley released notes detailing each firm's respective position on Campbell.

Credit Suisse
Credit Suisse analysts wrote, "We expect downward revisions to consensus estimates for FY15 due to difficult year ago comparisons, stagnant category trends, and increased investment to revitalize V8 beverages."

The analysts continued by expressing doubts that Campbell will be able to achieve its three-four percent sales algorithm without paying a premium to acquire in-trend products in the food and beverage industry. Based on this, Credit Suisse has lowered its fiscal year 2015 and 2016 EPS estimates by $0.02 and $0.05 to $2.58 and $2.72, respectively.

Morgan Stanley
Morgan Stanley analysts cited a combination of reduced fiscal year sales, declining promotional effectiveness and fiscal year 2015 "headwinds" as a reason to remain cautious in regards to Campbell.

Additionally, the analysts wrote, "we remain concerned by CPB's longer term trend of reallocating marketing spend toward increasingly ineffective trade promotion, and its limited earnings growth despite more aggressive leveraging of its cost structure."

Similar to Credit Suisse, Morgan Stanley has responded by lowering it 2015 EPS estimate from $2.65 to $2.56.

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