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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 $44.00.

Why Reiterate?

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

From its earnings surprise history, we see that Campbell Soup has beaten the Zacks Consensus Estimate 18 times in the past 21 quarters, with an average positive surprise of 6.1%.

The recently posted adjusted earnings of 45 cents per share for fourth-quarter fiscal 2013 beat the Zacks Consensus Estimate of 42 cents, consequently resulting in a surprise of 10.7%. Moreover, quarterly earnings rose nearly 10% year over year, primarily driven by a 13% rise in the top line.

Buoyed by strong quarterly results, the company provided an impressive guidance for fiscal 2014 with sales from continuing operations projected to increase by 5%–6% and adjusted earnings per share to rise by 3%–5% year over year.

Apart from strong fourth-quarter results, Campbell Soup’s growth prospects appear promising. We believe that the company’s prudent investment and strategic initiatives toward product innovation and brand building will increase its customer base and profitability. Furthermore, Campbell Soup’s focus on improving the North American soup and simple meal business as well as expanding overseas operations bode well for future growth.

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 Campbell Soup’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 Soup 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 Soup’s market share, and consequently its top and bottom-line performances.

Other Stocks Worth Considering

Currently, Campbell Soup holds a Zacks Rank #4 (Sell). However, other stocks that are worth a look in the food industry include Boulder Brands, Inc. (BDBD - Snapshot Report), Dole Food Company Inc. and Kraft Foods Group, Inc. (KRFT - Analyst Report). All of these carry a Zacks Rank #2 (Buy).

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