Campbell Soup Co’s portfolio of well-recognized food brands provides a diversified and resilient revenue base. These household names have demonstrated enduring consumer appeal, offering stability and growth potential even in challenging economic environments.
Meanwhile, ongoing cost optimization efforts include the realization of $950 million in annual savings from a key acquisition and an additional $50 million from an integration. Both should drive meaningful margin expansion.
The stock trades at 14.4 times the company’s forward earnings forecast. That’s an attractive multiple considering the company’s strong brands and market share.
CAMPBELL SOUP CO. (Symbol CPB on Nasdaq; www.campbellsoupcompany.com) plans to change its name to “The Campbell’s Company,” reflecting its broader array of products. It also recently transferred its stock listing from the New York Stock Exchange to Nasdaq (the shares continue to trade under the “CPB” symbol.) The move should lower its administrative costs.
Under its new strategic plan, which began in 2018, Campbell sold most of its international and refrigerated-foods businesses. That let it focus on canned soups, pasta and V8 vegetable juices. Campbell also kept its snack food operations. They were significantly expanded in March 2018 when the company paid $6.1 billion for snack-foods maker Snyder’s-Lance.
In March 2024, the company completed its $2.9 billion acquisition of Sovos Brands Inc. (Nasdaq symbol SOVO), the maker of Rao’s pasta sauces. The new operations will add $1 billion to its annual sales.
As a result of that purchase, Campbell’s sales in its fiscal 2024 fourth quarter ended July 28, 2024, rose 10.9%, to $2.29 billion from $2.07 billion a year earlier. That missed the consensus forecast of $2.31 billion.
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If you exclude businesses that Campbell bought and sold, sales fell 1.2% in the latest quarter. That’s because lower selling prices (down 2%) offset a 1% improvement in volumes.
If you factor out costs related to the Sovos purchase and other unusual items, the company’s earnings rose 26.0%, to $0.63 a share from $0.50 a share. That beat the consensus estimate of $0.62.
Value Stocks: Substantial cost savings bolster the outlook for these iconic brands
Campbell also continues to realize savings in the wake of the Snyder’s-Lance acquisition. So far, it has reduced annual costs for its continuing businesses by $950 million. It expects those yearly savings to reach $1 billion by the end of fiscal 2025.
In addition, Campbell realized $10 million in savings in the latest quarter by combining its operations with those of Sovos. It expects annual costs savings will total $50 million by the end of fiscal 2026.
Campbell’s expect sales in fiscal 2025, excluding the Sovos purchase and the recent sale of its Pop Secret popcorn business, will rise about 1%. It also expects its earnings will rise between 1.0% and 4.0%, to between $3.12 and $3.22 a share. The stock trades at 14.4 times the midpoint of that range. That’s an attractive multiple considering the company’s strong brands and market share.
Longer term, Campbell expects its sales will rise 2% to 3% annually. It also expects earnings per share will improve between 7% and 9% annually through fiscal 2027.
Campbell last raised your quarterly dividend with the February 2021 payment. Investors now receive $0.37 a share, up 5.7% from $0.35. The current annual rate of $1.48 yields a solid 3.2%.
Your dividend has grown an average of 1.1% annually over the last 5 years. Campbell Soup’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Wall Street Stock Forecaster: Campbell Soup Co. is a buy.
