But that hasn’t stopped all four stocks from moving up in the past year. That’s because they continue to do a good job of streamlining their operations. They’re also benefiting from acquisitions, new products and rising sales in developing countries.

GENERAL MILLS INC. $40 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 645.2 million; Market cap: $25.8 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.generalmills.com) is one of the world’s largest food makers. Its top brands include Big G (cereal), Green Giant (canned and frozen vegetables), Pillsbury (baking dough), Old El Paso (tacos) and Progresso (soups and sauces).

In General Mills’ fiscal 2013 first quarter, which ended August 26, 2012, its sales rose 5.3%, to $4.05 billion from $3.8 billion a year earlier. Most of this gain is due to the company’s July 2011 purchase of a 51% stake in the private company that makes Yoplait yogurt; General Mills has made Yoplait products under license in the U.S. since 1977. The company also recently paid $940 million for a privately held maker of snacks and convenience meals in Brazil.

The extra sales from these new businesses helped offset the negative impact of foreign exchange rates; overseas markets supplied 27% of its total sales. As well, General Mills lowered some of its prices to compete with low-cost generic brands.

Earnings rose 2.1%, to $438.3 million from $429.4 million. Earnings per share rose 3.1%, to $0.66 from $0.64, on fewer shares outstanding. These figures exclude a number of unusual items, such as costs to integrate its new operations and gains and losses on hedging contracts that General Mills uses to lock in prices of certain ingredients.

The company’s strong balance sheet gives it plenty of room to make more acquisitions. It ended the quarter with $5.5 billion of long-term debt, or just 21% of its market cap. It also held cash of $1.5 billion, or $2.34 a share.

General Mills will probably earn $2.67 a share in its current fiscal year. The stock trades at 15.0 times that figure. The $1.32 dividend yields 3.3%.

General Mills is a buy.

H.J. HEINZ CO. $56 (New York symbol HNZ; Income Portfolio, Consumer sector; Shares outstanding: 320.2 million; Market cap: $17.9 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.heinz.com) makes a wide variety of processed foods, including condiments, sauces, soups, baked beans, pastas and baby food. Its flagship product, Heinz ketchup, accounts for about 60% of U.S. ketchup sales.

The company continues to target fast-growing markets like China, Russia and Brazil for new growth. For example, in April 2011 it bought 80% of Brazil’s leading maker of tomato pastes, sauces and condiments for $493.5 million.

Even with these new operations, Heinz’s sales fell 1.5% in its fiscal 2013 first quarter, which ended July 29, 2012, to $2.79 billion from $2.83 billion a year earlier. However, the company gets 60% of its revenue from outside North America, and the higher U.S. dollar is hurting the value of its overseas sales.

Sales in emerging markets rose 19.3% and now account for 26% of Heinz’s overall revenue. That partly reflects sales from companies Heinz recently bought. The company also increased its selling prices to offset rising ingredient costs.

As well, Heinz is starting to benefit from its recent restructuring, which included plant closures and job cuts. Without unusual items, its earnings would have risen 12.1% in the quarter, to $286.0 million from $255.2 million. Earnings per share rose 10.1%, to $0.87 from $0.79, on fewer shares outstanding.

The company’s sound balance sheet will let it continue to expand in emerging markets and increase its marketing spending in developed countries. Its longterm debt of $4.1 billion is a moderate 23% of its market cap. It also holds cash of $978.5 million, or $3.06 a share.

Heinz forecasts earnings of around $3.57 a share for fiscal 2013. The stock trades at a reasonable 15.7 times that estimate. The $2.06 dividend yields 3.7%.

Heinz is a buy.

CONAGRA FOODS INC. $28 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 406.1 million; Market cap: $11.4 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www. conagrafoods.com) makes a wide variety of packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter, Orville Redenbacher popcorn and Reddiwip whipped cream.

In its fiscal 2013 first quarter, which ended August 26, 2012, ConAgra’s earnings soared 166.6%, to $250.1 million, or $0.61 a share. A year earlier, it earned $93.8 million, or $0.23 a share.

If you exclude all unusual items, including gains and losses on hedging contracts that ConAgra uses to lock in prices for wheat, corn and other ingredients, earnings per share would have risen 41.9%, to $0.44 from $0.31.

ConAgra continues to benefit from new products, such as Greek frozen yogurt. Savings from a recent restructuring plan have also spurred its earnings.

Sales rose 6.7%, to $3.3 billion from $3.1 billion. Sales to consumers (which account for 62% of the total) rose 8.0%, mainly due to contributions from acquisitions and higher selling prices. Business sales (38% of overall revenue) rose 4.6%.

The company now expects to earn $2.03 to $2.06 a share in fiscal 2013. That’s up from its earlier forecast of $1.95 to $1.99. The stock trades at a reasonable 13.7 times the midpoint of the new range.

ConAgra also raised its quarterly dividend by 4.2%, to $0.25 a share from $0.24. The new annual rate of $1.00 yields 3.6%.

ConAgra is a buy.

CAMPBELL SOUP CO. $35 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 316.0 million; Market cap: $11.1 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.campbellsoupcompany.com) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.

In its 2012 fiscal year, which ended July 29, 2012, Campbell’s earnings fell 7.4%, to $783 million from $846 million in fiscal 2011. The company spent $412 million on share buybacks in fiscal 2012. Because of fewer shares outstanding, earnings per share fell 3.9%, to $2.44 from $2.54.

These figures exclude costs related to a recent restructuring plan, under which the company cut jobs and closed its Russian operations.

Sales fell 0.2%, to $7.71 billion from $7.72 billion. That’s mainly because the higher U.S. dollar hurt the contribution of Campbell’s overseas operations; the company gets around 50% of its sales from outside the U.S.

Campbell aims to spur its sales by developing new soups and sauces. In the current fiscal year, for example, it plans to launch 50 new products.

On August 6, 2012, Campbell completed its $1.55-billion purchase of Bolthouse Farms, a Californiabased private company that produces fresh carrots, salad dressings and fruit juices. The company already uses Bolthouse’s carrots in its juices and soups. This business should add $750 million to Campbell’s fiscal 2013 sales and $0.05 to $0.07 a share to its earnings.

The company borrowed the cash it needed to buy Bolthouse. Even so, its balance sheet remains strong. As of July 29, 2012, its long-term debt was $2.0 billion, or a low 18% of its market cap. It also held cash of $335.0 million, or $1.06 a share.

Including Bolthouse, Campbell should earn $2.54 a share in 2013. The stock trades at 13.8 times that forecast. Campbell also has a long history of raising its dividend. The current rate of $1.16 yields 3.3%.

Campbell Soup is a buy.

The company’s sales rose 1.7%, from $7.9 billion in 2007 to $8.0 billion in 2008 (fiscal years end July 31). Sales fell to $7.6 billion in 2009, but rose to $7.7 billion in 2011.

Erratic earnings set to stabilize

Earnings fell from $1.99 a share (or a total of $792 million) in 2007 to $1.75 a share (or $671 million) in 2008. Earnings rebounded to $2.42 a share (or $844 million) in 2010. In 2011, overall earnings fell to $802 million, but earnings per share remained unchanged at $2.42 due to fewer shares outstanding. Without unusual costs, including a 2010 charge related to the U.S. health-care law, which eliminates a subsidy that companies get for contributions to retired employees’ prescription-drug plans, earnings per share would have risen 2.8% in 2011, to $2.54 from $2.47.

Campbell gets 35% of its sales from its U.S. Simple Meals division, which sells soups and other canned foods. This division’s sales fell 6.4% in 2011, mainly because it had to increase its prices to offset rising ingredient costs. That cut its sales volumes by 5%.

Sales declined 0.4% at the U.S. beverage division (10% of overall sales) as higher advertising spending offset strong sales of new V8 drinks.

However, sales of snack foods (30% of overall sales) rose 9.2% in 2011 because of higher prices and strong demand for Goldfish brand crackers. Sales at the International Simple Meals division (20% of sales) rose 2.8%, mainly due to favourable foreign exchange rates. The North American Foodservice division (10% of sales) reported a 2.1% sales increase, as restaurants ordered more refrigerated soup.

Big plans for 2012

Spending on new product development rose 4.9% in 2011, to $129 million (or 1.7% of sales) from $123 million (or 1.6% of sales) in 2010.

This higher spending will help Campbell launch 35 new products in fiscal 2012, including new regionally inspired soups, such as Creole-style chicken, and more V8 drinks. In addition, the company is building a $30-million facility in Connecticut that will focus on new snacks and baked goods. Campbell also plans to spend $100 million to promote its new products in 2012.

The company can easily afford these investments. Its long-term debt of $2.4 billion is just 24% of its market cap. It also holds cash of $285 million, or $0.90 a share.

Low p/e for a global stalwart

Campbell’s higher development and advertising spending will limit its 2012 earnings to $2.30 a share. The stock trades at a 13.9 times that estimate. However, earnings should rebound to $2.50 a share in 2013. That gives the stock a p/e ratio of 12.8, which is low in light of Campbell’s well-known brands and strong global prospects. The $1.16 dividend yields 3.6%.

Campbell Soup is a buy.

In the year ended July 31, 2011, Campbell’s earnings fell 4.6%, to $805 million from $844 million a year earlier. Earnings per share were unchanged at $2.42 on fewer shares outstanding. If you exclude one-time charges related to a restructuring plan and charges related to the U.S. health-care law, earnings per share would have risen 2.8%, to $2.54 from $2.47. On this basis, the latest earnings beat the consensus earnings estimate of $2.49 a share.

Investing in stocks: Campbell spends to put new soups and sauces on shelves

Revenue rose just 0.6%, to $7.72 billion from $7.68 billion. That’s mainly because the company raised its prices to offset higher ingredient and promotional costs. The weaker U.S. dollar also enhanced the contribution of its overseas operations.

The company continues to spend heavily developing new soups and sauces. It’s also modernizing its plans with new equipment. These costs will likely cut Campbell’s fiscal 2012 earnings to $2.40 a share. However, these investments will improve the company’s long-term prospects.

We updated our advice on Campbell Soup in our September 9, 2011, Wall Street Stock Forecaster hotline, You can view it immediately view when you take a 1-month free trial to Wall Street Stock Forecaster, our newsletter written especially for Canadian interested in investing in stocks in the U.S. with a substantial margin of safety. Click here to get started right away.

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In the three months ended May 1, 2011, the large cap stock’s earnings rose 11.3%, to $187 million from $168 million a year earlier. Earnings per share rose 16.3%, to $0.57 from $0.49, on fewer shares outstanding. That beat the consensus earnings estimate of $0.52 a share. If you exclude one-time charges in the year-earlier period related to a restructuring and changes in the new U.S. health-care law, earnings per share would have risen 5.6%.

Revenue rose just 0.6%, to $1.81 billion from $1.80 billion. Sales at the large cap stock’s U.S. Soups, Sauces and Beverages division (43% of total revenue) fell 8%. That’s mainly because the company raised its prices to offset higher ingredient costs. This business is also facing stronger competition from other ready-to-eat foods, such as frozen pizza.

Revenue at the Baking and Snacking division (29% of total revenue) rose 10%, largely because the weaker U.S. dollar enhanced the contribution of overseas sales. Revenue from the International Soup division (20% of total revenue) rose 7%, while revenue from the North American Foodservice division (8% of total revenue), which sells food to restaurants, rose 5%.

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In the three months ended January 30, 2011, company’s sales fell 1.2%, to $2.13 billion from $2.15 billion. Soup sales fell 4.0% in the U.S. The company continues to face strong competition from generic brands. In response, it ran promotions that discounted the prices of some of its brands, particularly ready-to-serve soups.

Earnings fell 7.7%, to $239.0 million from $259.0 million a year earlier. The company spent $417 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share fell 4.1% to $0.71 from $0.74. The lower sales and higher advertising spending were the main reasons for the decline.

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The company gets 30% of its sales from international markets. Its biggest foreign markets are Australia and Europe.

Campbell looks overseas for growth

Like Heinz, Campbell aims to spur its long-term growth through higher sales in emerging markets. It now sells its soups in 22 Russian cities, and aims to reach 100 cities in the next few years. In China, Campbell recently launched a low-cost can of broth. Canned foods account for a tiny fraction of total food consumption in these countries, so there’s lots of room to grow.

Campbell is also developing more healthier products. For example, it now sells low-sodium soups and vegetable drinks, as well as baked goods made from whole grains. These premium products generate higher profit margins than Campbell’s regular products.

The company’s sales rose 16.0%, from $6.9 billion in 2006 to $8.0 billion in 2008 (fiscal years end July 31). Sales fell to $7.6 billion in 2009, but rose to $7.7 billion in 2010.

Earnings rose from $1.73 a share (or a total of $720 million) in 2006 to $1.99 a share (or $792 million) in 2007. In 2008, the company sold its Godiva chocolate business for $850 million. As a result, earnings fell to $1.75 a share (or $671 million). Earnings improved to $2.42 a share (or $844 million) in 2010. If you exclude unusual costs, the company would have earned $2.47 a share in 2010, up 11.8% from $2.21 in 2009.

Campbell’s total debt of $2.8 billion is a low 23% of its market cap, so it can easily afford to make acquisitions and invest in new products. It also holds cash of $254 million, or $0.76 a share.

Earnings should grow to $2.63 a share in fiscal 2011. The stock trades at 13.7 times that figure.

Campbell Soup is a buy.

Most well-established companies have built up strong reputations that can help them overcome the inevitable downturns. Their trusted brands also make it easier for them to launch new products, or expand into new markets.

Heinz and Campbell Soup are two good examples. Both companies began operating in 1869. Together, they own some of the best-known brands in the food industry. Their strong brands are helping them enter fast-growing markets, such as China, India and Russia. As well, both companies are introducing healthier products to spur sales in developed countries.

H.J. HEINZ CO. $49 (New York symbol HNZ; Income Portfolio, Consumer sector; Shares outstanding: 318.3 million; Market cap: $15.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.7%; WSSF Rating: Above Average) makes a wide variety of processed foods, including condiments, sauces, soups, baked beans, pastas and infant food. Its flagship product, Heinz Ketchup, accounts for about 60% of U.S. ketchup sales.

The company continues to expand its main brands, including Ore-Ida (frozen potatoes), Classico (pasta sauces) and Weight Watchers (diet foods). Heinz’s 15 top-selling brands each generate annual sales of over $100 million. Together, they supply 70% of Heinz’s total sales.

Heinz’s sales rose 21.4%, from $8.6 billion in 2006 to $10.5 billion in 2010 (fiscal years end April 30).

Earnings rose from $2.18 a share (a total of $750.2 million) in 2006 to $2.90 a share (or $923.1 million) in 2009. Earnings fell to $2.87 a share (or $914.5 million) in 2010, because unfavourable foreign-exchange rates cut earnings by $0.29 a share. Without exchangerate changes, earnings per share would have risen 9.3%.

Heinz plans to cut costs by a total of $1 billion over the next five years. It aims to achieve this by improving productivity, including installing uniform computer systems. It will also buy more raw materials in bulk.

The savings from this plan will help Heinz absorb rising costs for ingredients, including wheat and corn. The savings will also help pay for the company’s push into China and other fast-growing markets. Right now, these markets account for 15% of Heinz’s sales. The company aims to raise this to 25% by 2016, and eventually to 35% to 40%.

Part of the company’s growth strategy involves buying food companies in overseas markets. For example, Heinz recently agreed to pay $165 million for privately held Foodstar, a leading soy sauce maker in China. Heinz is also developing new products for these markets, including an infant formula that it will soon launch in China and Russia.

Higher ad spending should boost sales

Heinz also aims to spur sales by spending more to promote its products. In 2010, it spent $375.8 million on advertising, up 24.0% from $303.1 million in 2009.

The company’s strong balance sheet will support its expansion. Its total debt of $4.5 billion is a manageable 29% of its market cap. Heinz holds cash of $494.5 million, or $1.55 a share.

Heinz will probably earn $3.06 a share in fiscal 2011. The stock trades at 16.0 times that figure. The company continues to raise its dividend annually. The current rate of $1.80 a share yields 3.7%.

Heinz is a buy.

CAMPBELL SOUP CO. $36 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 335.7 million; Market cap: $12.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; WSSF Rating: Above Average) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.

The company gets 30% of its sales from international markets. Its biggest foreign markets are Australia and Europe.

Campbell looks overseas for growth

Like Heinz, Campbell aims to spur its long-term growth through higher sales in emerging markets. It now sells its soups in 22 Russian cities, and aims to reach 100 cities in the next few years. In China, Campbell recently launched a low-cost can of broth. Canned foods account for a tiny fraction of total food consumption in these countries, so there’s lots of room to grow.

Campbell is also developing more healthier products. For example, it now sells low-sodium soups and vegetable drinks, as well as baked goods made from whole grains. These premium products generate higher profit margins than Campbell’s regular products.

The company’s sales rose 16.0%, from $6.9 billion in 2006 to $8.0 billion in 2008 (fiscal years end July 31). Sales fell to $7.6 billion in 2009, but rose to $7.7 billion in 2010.

Earnings rose from $1.73 a share (or a total of $720 million) in 2006 to $1.99 a share (or $792 million) in 2007. In 2008, the company sold its Godiva chocolate business for $850 million. As a result, earnings fell to $1.75 a share (or $671 million). Earnings improved to $2.42 a share (or $844 million) in 2010. If you exclude unusual costs, the company would have earned $2.47 a share in 2010, up 11.8% from $2.21 in 2009.

Campbell’s total debt of $2.8 billion is a low 23% of its market cap, so it can easily afford to make acquisitions and invest in new products. It also holds cash of $254 million, or $0.76 a share.

Earnings should grow to $2.63 a share in fiscal 2011. The stock trades at 13.7 times that figure.

Campbell Soup is a buy.

KRAFT FOODS INC. $26 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.5 billion; Market cap: $39 billion; Price-to-sales ratio: 0.9; WSSF Rating: Above Average) is the world’s second-largest food company after Nestle. Top brands include Kraft (cheese), Maxwell House (coffee), Nabisco (biscuits and cookies) and Oscar Meyer (meats).

Kraft faces strong competition from private-label foods, particularly in some of its main product lines, such as cheese, coffee and processed meats. But it has been helped by lower costs for a number of its raw materials, especially dairy products.

In the three months ended March 31, 2009, Kraft’s revenue fell 6.5%, to $9.4 billion from $10 billion a year earlier. However, if you account for last year’s sale of its Post cereals business and the negative impact of currency rates on overseas sales, Kraft’s revenue rose 2.3%. Overall earnings rose 21%, to $662 million from $547 million. Earnings per share rose 28.6%, to $0.45 from $0.35, on fewer outstanding shares.

Kraft also completed a major restructuring last year, which, aside from the Post sale, included selling less-profitable brands and making its other operations more efficient. The plan should save Kraft $1.4 billion a year.

Kraft’s $18.4-billion long-term debt is a manageable 50% of its market cap. It holds cash of $1.2 billion, or $0.80 a share. Kraft should earn $1.91 a share this year, and the stock trades at 13.6 times that estimate. The $1.16 dividend yields 4.5%.

Kraft Foods is a buy.

GENERAL MILLS INC. $55 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 329 million; Market cap: $18.1 billion; Price-to-sales ratio: 1.3; WSSF Rating: Above Average) is the second-largest maker of breakfast cereals in the United States after Kellogg. Its main brands include Cheerios, Wheaties and Total. The company also makes Betty Crocker baking mixes, Green Giant canned and frozen vegetables and Yoplait yogurt.

General Mills will probably report earnings of $3.92 a share in its latest fiscal year, which ended May 31, 2009. That’s slightly higher than its previous forecast of $3.87 to $3.89. These figures exclude unusual items, mainly gains and losses on hedging contracts that General Mills uses to lock in prices for wheat, corn and other raw materials.

The company raised its selling prices last year in order to offset higher prices for these raw materials. Since then, these costs have stabilized; this was the main reason behind the higher earnings forecast. It also expects a lower income-tax rate in the fourth quarter of fiscal 2009.

General Mills will now focus other ways to improve sales. These include making healthier versions of its foods, such as low-sodium soups and gluten-free cereals for people who can’t digest wheat.

The company’s $5.8-billion long-term debt is a moderate 30% of its market cap. It also holds cash of $937.3 million, or $2.85 a share. That gives it lots of room to expand or make acquisitions.

General Mills’2010 earnings will probably rise to $4.15 a share, and the stock trades at just 13.3 times that figure. The $1.72 dividend yields 3.1%.

General Mills is a buy.

H.J. HEINZ CO. $35 (New York symbol HNZ; Income Portfolio, Consumer sector; Shares outstanding: 315 million; Market cap: $11 billion; Price-to-sales ratio: 1.1; WSSF Rating: Above Average) is a leading maker of condiments. Its flagship product, Heinz Ketchup, makes up about 60% of all ketchup sold in the U.S. Heinz also makes frozen potatoes (under the Ore-Ida brand), pasta sauces (Classico) and diet foods (Weight Watchers).

Heinz has expanded its overseas operations over the last few years. These now account for about 60% of its sales. And the company plans to keep adding new markets: it’s particularly interested in China, India, Russia and Poland.

However, Heinz’s international growth adds currency risk. In its latest fiscal year, which ended April 29, 2009, sales rose just 0.8%, to a record $10.15 billion from $10.07 billion in the prior year. But excluding the negative impact of the higher U.S. dollar, sales would have risen 7.4%. The company raised its selling prices, which helped offset a 1.5% drop in volumes. Earnings rose 9.3%, to $923.1 million from $844.9 million. Earnings per share rose 10.3%, to $2.90 from $2.63, on fewer outstanding shares.

In fiscal 2010, Heinz feels it can save $250 million through unspecified productivity improvements. Still, its 2010 earnings will probably fall to $2.65 a share due to the high U.S. dollar. The stock trades at a reasonable 13.2 times that estimate. The $1.68 dividend yields 4.8%.

Heinz is a buy.

CAMPBELL SOUP CO. $29 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 350.3 million; Market cap: $10.2 billion; Price-to-sales ratio: 1.3; WSSF Rating: Above Average) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.

Like Heinz (see at left) Campbell plans to spur growth by expanding overseas. International markets now supply 30% of its revenue. It is particularly interested in Russia and China, where soup is popular.

As a result of its growing international operations, unfavourable currency rates held back Campbell’s earnings by $0.04 a share in its third fiscal quarter, which ended May 3, 2009. The company’s sales fell 10.3%, to $1.7 billion from $1.9 billion. Currency rates accounted for about half of the decline.

Campbell earned $171 million in the latest quarter. That’s up 11% from $154 million a year earlier. Its earnings per share rose 20%, to $0.48 from $0.40, on fewer outstanding shares. These figures exclude a gain on the sale of its Godiva chocolate business and other unusual items.

Strong demand for Campbell’s low-sodium soups and other healthier foods should help it compete with low-cost generic brands. The stock trades at 13.4 times Campbell’s likely 2009 earnings of $2.17 a share. Its $2-billion long-term debt is a low 20% of its market cap. The $1.00 dividend yields 3.4%.

Campbell Soup is a buy.

CONAGRA FOODS INC. $20 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 447.2 million; Market cap: $8.9 billion; Price-to-sales ratio: 0.7; WSSF Rating: Above Average) makes a number of packaged foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Peter Pan peanut butter and Orville Redenbacher popcorn.

In its third fiscal quarter, which ended February 22, 2009, ConAgra’s earnings per share rose 17.6%, to $0.40 from $0.34 a year earlier. These figures exclude several non-recurring items, but they include a $0.05-a-share gain on hedging contracts, which ConAgra uses to lock in costs for wheat, corn and other ingredients. As well, ConAgra paid $0.03 a share in legal costs related to a 2007 peanut-butter recall that was caused by a salmonella outbreak.

Sales rose 6.1%, to $3.1 billion from $3 billion. ConAgra raised its selling prices because of higher raw-material costs. This offset lower sales volumes.

ConAgra continues to benefit from its plan to focus on its packaged-food operations. This includes its $2.8-billion sale of its commodity-trading operations in June of last year. Getting out of the volatile trading business gives ConAgra more predictable revenue streams and cuts its risk.

The company put $1.1 billion of the proceeds toward its debt. ConAgra’s long-term debt of $3.1 billion is now a manageable 35% of its market cap. It also used $900 million to buy back shares.

The stock trades at 13.2 times the $1.52 a share that ConAgra should earn in fiscal 2009. The $0.76 dividend yields 3.8%.

ConAgra is a buy.

DEL MONTE FOODS CO. $9.02 (New York symbol DLM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 197.7 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) makes a wide variety of canned fruits and vegetables, as well as sauces and soups. Del Monte also makes pet food under the 9Lives, Milk-Bone and Meow Mix brands.

In the fiscal year ended May 3, 2009, Del Monte’s earnings rose 25.5%, to $147.7 million, or $0.74 a share. In the prior year, it earned $117.7 million, or $0.58 a share. If you exclude an $0.08-a-share charge related to job cuts in the prior year, per-share earnings would have risen 12.1%. Sales rose 14.1%, to $3.6 billion from $3.2 billion.

Del Monte is raising the prices of its main brands, and spending more on marketing. It hopes these moves will make these products more profitable.

At the same time, Del Monte is selling its less-profitable businesses. Last October, it sold its StarKist subsidiary, which produces canned tuna, for $359 million. Del Monte put these proceeds toward its long-term debt, which now stands at $1.5 billion. This is still a high 83% of Del Monte’s market cap, but just $32.3 million is due this year. It also holds cash of $142.7 million, or $0.72 a share.

Del Monte will likely earn $0.78 a share in fiscal 2010, which gives the stock a p/e ratio of 11.6. The $0.20 dividend yields 2.2%.

Del Monte is a buy.

Like Heinz Campbell plans to spur growth by expanding overseas. International markets now supply 30% of its revenue. It is particularly interested in Russia and China, where soup is popular.

As a result of its growing international operations, unfavourable currency rates held back Campbell’s earnings by $0.04 a share in its third fiscal quarter, which ended May 3, 2009. The company’s sales fell 10.3%, to $1.7 billion from $1.9 billion. Currency rates accounted for about half of the decline.

Campbell earned $171 million in the latest quarter. That’s up 11% from $154 million a year earlier. Its earnings per share rose 20%, to $0.48 from $0.40, on fewer outstanding shares. These figures exclude a gain on the sale of its Godiva chocolate business and other unusual items.

Strong demand for Campbell’s low-sodium soups and other healthier foods should help it compete with low-cost generic brands. The stock trades at 13.4 times Campbell’s likely 2009 earnings of $2.17 a share. Its $2-billion long-term debt is a low 20% of its market cap. The $1.00 dividend yields 3.4%.

Campbell Soup is a buy.

In the past few years, the company has sold off its less promising businesses to focus on its core operations and brands.

Narrower focus pays off

Campbell’s sales rose from $6.7 billion in fiscal 2003 to $7.5 billion in 2005 (fiscal years end July 31). In 2006, the company sold its UK operations for $870 million, and sales fell to $7.3 billion. Sales rose 8.2% to $7.9 billion in 2007.

Earnings before unusual items rose from $1.52 a share (total $626 million) in 2003 to $1.71 a share ($707 million) in 2005. Earnings dipped to $1.66 a share ($681 million) in 2006, but rose 17.5% to $1.95 a share ($771 million) in 2007.

Healthy products should spur profits

Campbell is successfully developing healthier products, particularly low-sodium soups. Besides gaining favor with nutritionists and health-conscious consumers, healthier foods generate higher profits for Campbell than its regular products.

As part of its shift toward healthier products, Campbell recently sold its Godiva chocolates business for $850 million. The company plans to use the cash to buy back stock. It spent $1.1 billion on share repurchases in fiscal 2007.

Campbell is also expanding sales by making its soups more convenient to use, with disposable microwavable bowls and other innovative packaging. The company is also developing easier-to-use packaging for its snack foods and beverages.

Right now, overseas markets account for 30% of Campbell’s sales and 20% of its earnings. Its biggest foreign markets are Australia and Europe.

Campbell will now focus on expanding into China and Russia, the world’s largest consumers of soup. If Campbell can capture just a small portion of these markets, it could translate into big sales and earnings gains. Strong soup sales should also spur interest in Campbell’s other products.

Strong balance sheet limits risk

Campbell’s strong balance sheet gives it plenty of flexibility to invest in new products and marketing. Long-term debt of $1.8 billion is a reasonable 1.5 times annual cash flow. Goodwill and other intangibles of $2.6 billion represent a high 38% of its assets. However, Campbell’s brands have a lot of enduring value, so the chances of a large writedown are small.

Campbell’s earnings should grow to $2.06 in fiscal 2008, and the stock trades at 16.0 times that figure. The $0.88 dividend yields 2.7%.

Campbell Soup is a buy. We’re adding it to our WSSF Conservative Growth Portfolio.