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Will Soft U.S. Soup Sales Hurt Campbell's (CPB) Q4 Earnings?

Zacks Equity Research

Campbell Soup Company CPB is scheduled to release fourth-quarter fiscal 2019 results on Aug 30. This branded convenience food products company has a robust earnings surprise history and delivered average positive earnings surprise of nearly 11.6% in the trailing four quarters.

Let’s see what’s in store for the company this time around.

Campbell Soup Company Price and EPS Surprise



Campbell Soup Company Price and EPS Surprise

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

What to Expect?

The Zacks Consensus Estimate for earnings in the fiscal fourth quarter has remained unchanged over the past 30 days at 41 cents, which suggests a solid increase of 64% from the year-ago period’s reported figure. The consensus mark for revenues is pegged at $2,004 million, indicating a decline of 9.7% from the year-ago quarter’s reported figure.

Factors to Note

Soft U.S. Soup sales are likely to dent Campbell’s fiscal fourth-quarter results. Notably, the company has been suffering from soft U.S. soup sales for quite some time now due to weakness in ready-to-serve and condensed soups. Further, the divestiture of the Campbell Fresh segment is likely to weigh on the top line.

Nonetheless, the company should get some respite from its focus on the growing snacks business. As part of its core strategies, Campbell is committed to shifting its overall portfolio toward the fast-growing snacks category, which is expected to form about half of its proforma sales in the future. Markedly, the company’s buyout of Snyder's-Lance is enhancing the performance of the global biscuits and snacks portfolio. Brands under the snacks category are expected to boost performance, backed by enhanced marketing and innovation.

Also, Campbell is progressing well with its cost-saving plan, which was announced in fiscal 2015. The company’s focus on enhancing supply-chain efficiencies, curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. During the last reported quarter, Campbell generated savings worth $55 million as part of its multi-year, cost-saving program, which included synergies associated with Snyder’s-Lance’s buyout. This takes the company’s savings from the program to $605 million.

We expect such efforts to help it counter cost-related hurdles, which have been weighing on its gross margin. In fact, cost inflation is a common hurdle faced by many other food companies like Sysco SYY, General Mills GIS and Smucker SJM, among others.

However, the company’s adjusted gross margin is susceptible to volatile input prices of steel cans, vegetables and aluminum.

What the Zacks Model Unveils

Our proven model doesn’t predict a beat for Campbell this earnings season. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Campbell Soup has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. Notably, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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