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.
