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Campbell (CPB) Down 8.6% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Campbell Soup Company (CPB - Free Report) . Shares have lost about 8.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CPB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Campbell Beats Q2 Earnings & Sales Estimates
Campbell Soup Company posted second-quarter fiscal 2018 results, wherein both earnings and sales surpassed the Zacks Consensus Estimate and improved year over year. The company delivered a positive earnings surprise after three consecutive earnings misses while sales returned to positive after four straight misses.
Management stated that it was a tough quarter on account of persistent challenges in the U.S. soup category as well as Campbell Fresh division. In fact, this segment delivered lower-than-expected results due to difficulties in the super premium juice category.
Adjusted earnings of $1.00 per share increased 9.9% year over year and also outpaced the Zacks Consensus Estimate of 81 cents. Including one-time items, Campbell reported earnings of 95 cents per share that was significantly up from 33 cents in the year-ago quarter.
Net sales of $2,180 million inched up 0.4% and also came ahead of the Zacks Consensus Estimate of $2,174 million. However, organic sales dipped 2% on account of lower volumes mainly in the Americas Simple Meals and Beverages segment.
Further, the company’s adjusted gross margin contracted 2.2 percentage points to 35.2%. The decline was mainly due to cost inflation, escalated supply chain expenses and adverse mix, somewhat negated by productivity improvements as well as gains from cost savings.
Moreover, adjusted EBIT in the quarter was down 4% to $402 million on lower gross margin, compensated with lower marketing and selling costs as well as a rise in other income.
Segment Analysis
The Latin America business is managed as part of the Global Biscuits and Snacks segment starting from fiscal 2018. Earlier, this formed part of the Americas Simple Meals and Beverages segment.
Campbell reports its results under three segments namely, Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.
Americas Simple Meals and Beverages: In second-quarter fiscal 2018, sales at the division dipped 2% year over year to $1,196 million. Also, the segment’s organic sales were down 4% mainly due to softness in V8 Beverages and soup sales, somewhat mitigated by benefits in the Canada retail business. Excluding gains from the Pacific Foods buyout, sales at the U.S. soup decreased 7% on account of a drop in condensed soups as well as ready-to-serve soups. However, broth sales were comparable to last year.
Global Biscuits and Snacks: Sales at this division rose 4% at $726 million. Excluding the impact of currency tailwinds, organic sales grew 3% backed by Pepperidge Farm snacks strength representing growth in Goldfish crackers, cookies and benefits from Kelsen cookies in China. Further, Arnott’s biscuits’ sales were comparable to the previous year, excluding the positive effect from currency.
Campbell Fresh: Sales at this segment dipped 1% to $257 million mainly on lower sales at Bolthouse Farms refrigerated beverages.
Financials
Campbell ended the quarter with cash and cash equivalents of $196 million, long-term debt of $2,247 million and total equity of $1,949 million. Additionally, the company generated $660 million as cash flow from operations, in the first six months of fiscal 2018.
Other Developments
In the quarter under review, management has completed the buyout of Pacific Foods to widen its foothold in the organic soup and broth categories. Further, it agreed to buy the leading snacks maker — Snyder’s-Lance, Inc. — which is likely to strengthen Campbell Soup’s portfolio of snacking brands, thus making it a snacking leader.
Meanwhile, Campbell Soup remains on track with its multi-year cost-savings initiative as it achieved $20 million of savings in the fiscal second quarter, bringing the entire program-to-date savings to $365 million. Furthermore, the company has raised the annualized savings target from $450 million to $500 million, which is expected to be achieved by the end of fiscal 2020.
Fiscal 2018 Outlook
Campbell remains focused on getting its C-Fresh division back on growth track and solving its key customer issue, thereby expecting moderate soup sales in the second half of fiscal 2018. Going into the spring season, the company expects its initiatives to boost beverage results in the second half. Further, its solid focus on cost savings and core strategic imperatives are likely to drive growth in the long term.
Management updated its outlook for fiscal 2018 to include the effects of the Pacific Foods buyout as well as the Tax Cuts and Jobs Act. The company projects sales growth to range from negative 1% to positive 1%. Also, adjusted EBIT is expected to decline in the band of negative 7% to negative 5%. Adjusted earnings are envisioned in the band of $3.10-$3.17 per share, representing increase of 2-4%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.
At this time, CPB has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was also allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CPB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Campbell (CPB) Down 8.6% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Campbell Soup Company (CPB - Free Report) . Shares have lost about 8.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CPB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Campbell Beats Q2 Earnings & Sales Estimates
Campbell Soup Company posted second-quarter fiscal 2018 results, wherein both earnings and sales surpassed the Zacks Consensus Estimate and improved year over year. The company delivered a positive earnings surprise after three consecutive earnings misses while sales returned to positive after four straight misses.
Management stated that it was a tough quarter on account of persistent challenges in the U.S. soup category as well as Campbell Fresh division. In fact, this segment delivered lower-than-expected results due to difficulties in the super premium juice category.
Adjusted earnings of $1.00 per share increased 9.9% year over year and also outpaced the Zacks Consensus Estimate of 81 cents. Including one-time items, Campbell reported earnings of 95 cents per share that was significantly up from 33 cents in the year-ago quarter.
Net sales of $2,180 million inched up 0.4% and also came ahead of the Zacks Consensus Estimate of $2,174 million. However, organic sales dipped 2% on account of lower volumes mainly in the Americas Simple Meals and Beverages segment.
Further, the company’s adjusted gross margin contracted 2.2 percentage points to 35.2%. The decline was mainly due to cost inflation, escalated supply chain expenses and adverse mix, somewhat negated by productivity improvements as well as gains from cost savings.
Moreover, adjusted EBIT in the quarter was down 4% to $402 million on lower gross margin, compensated with lower marketing and selling costs as well as a rise in other income.
Segment Analysis
The Latin America business is managed as part of the Global Biscuits and Snacks segment starting from fiscal 2018. Earlier, this formed part of the Americas Simple Meals and Beverages segment.
Campbell reports its results under three segments namely, Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.
Americas Simple Meals and Beverages: In second-quarter fiscal 2018, sales at the division dipped 2% year over year to $1,196 million. Also, the segment’s organic sales were down 4% mainly due to softness in V8 Beverages and soup sales, somewhat mitigated by benefits in the Canada retail business. Excluding gains from the Pacific Foods buyout, sales at the U.S. soup decreased 7% on account of a drop in condensed soups as well as ready-to-serve soups. However, broth sales were comparable to last year.
Global Biscuits and Snacks: Sales at this division rose 4% at $726 million. Excluding the impact of currency tailwinds, organic sales grew 3% backed by Pepperidge Farm snacks strength representing growth in Goldfish crackers, cookies and benefits from Kelsen cookies in China. Further, Arnott’s biscuits’ sales were comparable to the previous year, excluding the positive effect from currency.
Campbell Fresh: Sales at this segment dipped 1% to $257 million mainly on lower sales at Bolthouse Farms refrigerated beverages.
Financials
Campbell ended the quarter with cash and cash equivalents of $196 million, long-term debt of $2,247 million and total equity of $1,949 million. Additionally, the company generated $660 million as cash flow from operations, in the first six months of fiscal 2018.
Other Developments
In the quarter under review, management has completed the buyout of Pacific Foods to widen its foothold in the organic soup and broth categories. Further, it agreed to buy the leading snacks maker — Snyder’s-Lance, Inc. — which is likely to strengthen Campbell Soup’s portfolio of snacking brands, thus making it a snacking leader.
Meanwhile, Campbell Soup remains on track with its multi-year cost-savings initiative as it achieved $20 million of savings in the fiscal second quarter, bringing the entire program-to-date savings to $365 million. Furthermore, the company has raised the annualized savings target from $450 million to $500 million, which is expected to be achieved by the end of fiscal 2020.
Fiscal 2018 Outlook
Campbell remains focused on getting its C-Fresh division back on growth track and solving its key customer issue, thereby expecting moderate soup sales in the second half of fiscal 2018. Going into the spring season, the company expects its initiatives to boost beverage results in the second half. Further, its solid focus on cost savings and core strategic imperatives are likely to drive growth in the long term.
Management updated its outlook for fiscal 2018 to include the effects of the Pacific Foods buyout as well as the Tax Cuts and Jobs Act. The company projects sales growth to range from negative 1% to positive 1%. Also, adjusted EBIT is expected to decline in the band of negative 7% to negative 5%. Adjusted earnings are envisioned in the band of $3.10-$3.17 per share, representing increase of 2-4%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.
Campbell Soup Company Price and Consensus
Campbell Soup Company Price and Consensus | Campbell Soup Company Quote
VGM Scores
At this time, CPB has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was also allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CPB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.