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Campbell Soup (CPB) Q4 Earnings Beat Estimates, Sales Improve

Zacks Equity Research

Campbell Soup Company CPB has released fourth-quarter fiscal 2019 results, wherein the bottom line surpassed the Zacks Consensus Estimate. Its sales improved year over year, backed by gains from the Snacks business. Moreover, the company provided an optimistic view for fiscal 2020.

Q4 Highlights

Adjusted earnings from continuing operations were 42 cents per share and advanced 14% year over year, courtesy of lower adjusted tax. The company’s bottom line surpassed the Zacks Consensus Estimate of 41 cents. Including Campbell International, adjusted earnings in the quarter were 50 cents while adjusted net earnings were 49 cents.

Net sales from continuing operations were $1,780 million, reflecting rise of 2%, owing to growth in the Meals & Beverages, and Snacks units. The Zacks Consensus Estimate for the company’s sales was pegged at $2,004 million. Including Campbell International, net sales amounted to $2,024 million. Further, organic net sales improved 2%.

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

Moving on, the company’s gross margin improved 260 basis points (bps) to 34%. Adjusted gross margin inched up 0.6 percentage points to reach 33.7%. Expansion in gross margin was mainly driven by improved supply-chain productivity, and gains from cost-saving efforts and lapping costs.

Adjusted EBIT rose 1% to $252 million, driven by higher sales and earnings, partly countered by increased marketing and selling expenses. On a combined basis, adjusted EBIT amounted to $288 million.

Segment Analysis

Management is in the process of divesting Campbell International, which is likely to be concluded in the first half of fiscal 2020. The international unit was previously included in the Global Biscuits and Snacks segment. As a result of this divestiture, from now on the company will report operations under two main segments, Meals & Beverages, and Snacks.

Meals & Beverages: Sales at this division were flat year over year at $813 million. Further, the segment’s organic sales grew 1%, indicating solid performance from the U.S. soup business. U.S. soup sales advanced 3%, owing to gains from ready-to-serve and condensed soups. This was partially countered by softness in broth. Operating earnings in the Meals & Beverages segment declined 3% to $151 million, owing to cost inflation and incentive compensation expenses.

Snacks: Sales at this division went up 3% to $967 million. Organic sales improved 4%. The segment gained from advancements in Pepperidge Farm bakery products, Kettle Brand potato chips, Snack Factory Pretzel Crisps, Late July snacks and Goldfish crackers. Operating earnings in this category grew 2% and reached $133 million. Sales gains and cost savings were partly countered by cost inflation as well as higher marketing expenses and incentive compensation.

Financials

Campbell ended the quarter with cash and cash equivalents of $179 million, total debt of $8,712 million, and total equity of $1,112 million. Additionally, the company generated $1,398 million as net cash from operating activities in fiscal 2019.

Other Developments & Fiscal 2020 Outlook

During the quarter under review, Campbell generated savings worth $45 million as part of its multi-year cost-saving program, which included synergies associated with the Snyder’s-Lance buyout. In fiscal 2019, savings from the program amounted to $165 million. Further, management continues to anticipate cumulative annualized savings from continuing operations of $850 million by fiscal 2022 end.

Management provided its outlook for fiscal 2020. It projects sales to rise 1-3% year over year. Adjusted EBIT is expected to rise 2-4% while adjusted earnings per share are likely to rise 9-11%. The guidance for fiscal 2020 takes into consideration gains from an additional 53rd week.

Moreover, management highlighted that proceeds from the sale of Campbell Fresh and Campbell International are being used to curtail debt load.

 


Price Performance & Zacks Rank

We note that Campbell’s shares have gained 19.3% in the past three months compared with the industry’s growth of 8%.

The company currently carries a Zacks Rank #4 (Sell).

Looking for Better-Ranked Consumer Staples Stocks? Check These

General Mills, Inc. GIS currently has long-term earnings per share (EPS) growth rate of 7% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hershey HSY presently has a Zacks Rank #2 and long-term EPS growth rate of 8%.

Estee Lauder EL currently has a long-term EPS growth rate of 13% and a Zacks Rank of 2.

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