Topic: Value Stocks

Campbell Soup Co. is growing earnings and yield

Rising sales, cost cutting and a major acquisition helped rocket quarterly earnings 79.5% as compared to last year.

The company is also disposing of non-core assets to focus on canned soups, pasta, V8 vegetable juices, and snack products.

The stock trades at 16.5 times the company’s 2019 earnings forecast.

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CAMPBELL SOUP CO., (New York symbol CPB;, last raised its quarterly dividend by 12.2%, with the October 2016 payment. Investors now receive $0.35 a share; the annual rate of $1.40 yields 3.4%.

The company recently completed a strategic review of its operations. As a result, it plans to sell its international and refrigerated-foods businesses. That will let it focus on canned soups, pasta, V8 vegetable juices, and snack products.

Campbell has now agreed to sell its Bolthouse Farms business, which produces fresh carrots, to a private equity firm for $510.0 million. The company is also looking at selling its Kettle Chips business, which it acquired as part of its $6.1 billion acquisition of snack-foods maker Snyder’s-Lance in March 2018.

In the fiscal 2019 third quarter, ended April 28, 2019, sales from ongoing operations jumped 16.0% to $2.18 billion from $1.89 billion a year earlier. That missed the consensus forecast of $2.35 billion.

The sales gain is mainly due to the Snyder’s-Lance purchase. Without those new operations, overall sales were flat, as higher sales of biscuits and snacks (53% of the total) offset lower demand for meals and beverages (47%).

Value Stocks: Cost cutting saves $535 million so far

Campbell earned $131 million, or $0.43 a share, in the quarter. That’s up 79.5% from $73 million, or $0.24, a year earlier. If you exclude all unusual items, earnings per share fell 5.1%, to $0.56 from $0.59. The drop was mainly because Campbell earns lower margins on Snyder’s-Lance’s products than its other products. Even so, the latest earnings easily beat the consensus estimate of $0.47 a share.

The company continues to cut costs in the wake of the Synder’s-Lance acquisition. So far, it has reduced annual costs for its continuing businesses by $535 million. It expects those yearly savings to reach $850 million by the end of fiscal 2022.

Campbell now expects to earn between $2.50 and $2.55 a share for all of fiscal 2019. That’s up from its earlier forecast of $2.45 to $2.53 a share. The stock trades at 16.5 times the midpoint of its new range.

The company’s dividend has grown an average of 2.3% annually over the last 5 years.

Recommendation in Wall Street Stock Forecaster: Campbell Soup Co is a buy.


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