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High-quality foods and simple meals manufacturer, Campbell Soup Company (CPB - Analyst Report) remains on our Neutral list with a target price of $45.00.

Why Reiterate?

We are impressed with Campbell’s consistent positive earnings surprise trend, strong revenue growth and optimistic guidance. However, rising commodity costs remain a looming threat.

From its earnings surprise history, we see that Campbell has beaten the Zacks Consensus Estimate 17 times in the past 20 quarters, with an average positive surprise of 6.1%.

The recently reported earnings of 62 cents per share for third-quarter fiscal 2013 which beat the Zacks Consensus Estimate of 56 cents, consequently resulting in a surprise of 10.7%. Moreover, quarterly earnings surged nearly 11% year over year, primarily driven by a 15% rise in the top line.

Buoyed by strong quarterly results, the Zacks Rank #2 (Buy) company raised its fiscal 2013 adjusted earnings per share guidance range to $2.58–$2.62 from $2.51–$2.57 as forecasted earlier. The current Zacks Consensus Estimate is $2.61 per share.

Further, Campbell Soup expects its sales for fiscal 2013 to reach the higher-end of the previously forecasted range of 10%–12%. Moreover, adjusted EBIT for fiscal 2013 will likely be at the higher end of the company’s earlier guidance range of 4%–6%.

Apart from strong fourth-quarter results, Campbell’s growth prospects appear promising. We believe the company’s prudent investment and strategic initiatives toward product innovation and brand building will increase its customer base and profitability.

On the flip side, rising commodity prices pose a challenge and may undermine the company’s future performance. The raw and packaging materials used in the company’s business include tomato paste, grains, beef, poultry, vegetables, steel, glass, paper and resin. Significantly, many of these items are subject to price fluctuations.

Further, Campbell operates in a competitive environment and strives to maintain its market share, actively contesting with numerous manufacturers and marketers of high quality, branded convenience food products. The company primarily competes on the basis of brand recognition, quality, taste and price. Failure to offer high quality differentiated products at a competitive price may hamper Campbell’s market share, and consequently its top and bottom-line performances.

Other Stocks Worth Considering

Other stocks that are worth a look in the food industry include Omega Protein Corp. , Flowers Foods, Inc. (FLO - Snapshot Report) and J&J Snack Foods Corp. (JJSF - Snapshot Report). Omega and Flowers Foods carry a Zacks Rank #1 (Strong Buy) while J&J Snack has a Zacks Rank #2 (Buy).

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