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We are maintaining our long-term Neutral recommendation on New Jersey based Campbell Soup Company (CPB - Analyst Report).

Campbell recently reported its fourth quarter and fiscal 2012 results (ended July 2012). Going with its strategy of brand expansion and cost management, the company reported better-than-expected quarterly results.

Its reported net sales of $1,613 million for the quarter were higher than the prior-quarter level as well as Zacks Consensus Estimate. Moreover, quarterly earnings of 41 cents per share were also ahead of the Zacks Consensus Estimate of 38 cents.

Further, the company anticipates an improvement in sales in the range of 10%–12% for the fiscal 2013, with annual earnings to lie between $2.51 and $2.57 per share, reflecting an increase of 3%–5% from 2012 level.

Going forward, the company’s recent Bolthouse acquisition will prove to be accretive to its fiscal 2013 top and bottom line. In addition, the company intends to boost its top line and increase return on investment through a new strategic framework, primarily focusing on brand expansion, and thereby plans to launch nearly 50 new products in fiscal 2013 while emphasizing on brand advertisement and consumer promotional activities.

We believe that Campbell’s prudent investment and strategic initiatives toward product innovation and brand building will lead to an increase in its customer base and profitability. Moreover, the company’s continuous focus on research and development to further differentiate its higher-margin sauces brands will strengthen its competitive position in the international market.

On the flip side, rising commodity costs, intense competition from other established players and exposure to unfavorable foreign currency fluctuations may undermine the company’s growth prospects.

Due to its exposure in international market, Campbell Soup remains prone to currency fluctuations, which remains a major reason for continuous decline in its International Simple Meals and Beverages segment. Sales at this segment declined 7.0% to $294.0 million in the fourth quarter 2012, primarily due to a 4% rise in promotional spending and 8% negative impact from currency translation.

Moreover, Campbell operates in a highly competitive food industry and experiences worldwide competition in all its principal products from well-established rivals like General Mills Inc. (GIS - Analyst Report), H. J. Heinz Co. , which may dent the company’s performance going forward.

Considering these above factors, we think that the investors should wait to own this stock until its strategic initiatives and turnaround plans reflect better visibility.

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