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Campbell (CPB) to Gain From At-home Dining Trends in 2021
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Increased at-home dining practices are among the many lifestyle changes triggered by the coronavirus pandemic, thanks to the enhanced social-distancing norms. Industry experts believe such habits are likely to prevail even after the pandemic subsides, as consumers have begun realizing the health benefits of cooking and dining at home. Well, the trend is likely to be an upside for several food industry players, including Campbell Soup Company (CPB - Free Report) .
Markedly, this Zacks Rank #3 (Hold) company kicked off fiscal 2021 on a solid note with stellar first-quarter results. Both earnings and sales cruised past the Zacks Consensus Estimate and advanced year over year, reflecting sturdy volume growth on skyrocketing demand. Apart from this, the company has been gaining from cost-saving initiatives and investments in brand growth. We note that shares of Campbell have gained 3.3% in the past three months compared with the industry’s rise of 5.3%.
That said, let’s take a closer look at the factors impacting this well-known convenience food products company’s performance.
Volume Growth to Remain a Key Catalyst
During first-quarter fiscal 2021, Campbell’s top line rose 7% year on year, while organic net sales (excluding the impact from the European chips business divestiture in fiscal 2020) advanced 8%. Organic sales gained from solid volume in the Meals & Beverages and the Snacks segments. Remarkably, volumes were driven by rising demand as at-home consumption has been high amid the pandemic. Also, volumes gained from enhanced retailer soup inventories.
Notably, Campbell’s Snacks business, which accounts for a considerable chunk of its revenues, has been witnessing rapid growth, lately. Excluding the impact of the European chips business divestiture, organic sales in the snacks segment climbed 4% during the fiscal first quarter on growth in the company’s power brands. Management highlighted that demand for unique and differentiated snacks was high during the first quarter as at-home consumption shot up.
The company expects the elevated demand scenario to continue, and is also focused on undertaking increased brand investments. Accordingly, it expects net sales and adjusted EBIT in the second quarter to increase in the band of 5-7% each, year-on-year. Furthermore, the company envisions adjusted EPS in the range of 81-83 cents per share that indicates growth of 12-15% from the adjusted earnings per share of 72 cents reported in the year-ago quarter.
Markedly, the Zacks Consensus Estimate for sales in the second quarter is currently pegged at 2.3 billion, indicating a rise of 6.2% from the prior year quarter. The consensus mark for earnings is currently pegged at 84 cents, reflecting a rise of 16.7% from the figure reported in the prior-year quarter.
Wrapping Up
We note that Campbell has been struggling with cost inflation for a while now. During the first quarter of fiscal 2021, gross margin was partly impacted by rise in net supply-chain expenses, which resulted from cost inflation and costs associated with COVID-19. Nevertheless, we expect Campbell’s prudent cost-saving efforts to help fight off the high input cost hurdles. Speaking of savings initiatives, during the first quarter, Campbell generated savings worth $15 million, which included synergies associated with the Snyder’s-Lance buyout. With this, the company has generated total program-to-date savings of $740 million. Management anticipates cumulative annualized savings from continuing operations of $850 million by fiscal 2022-end.
These factors, along with consumers’ inclination toward at-home consumption, as well as Campbell’s strategic efforts toward product innovation and brand building are likely to continue fueling its performance.
Conagra Brands Inc. (CAG - Free Report) , also with a Zacks Rank of 2, has a long-term earnings growth rate of 7%.
B&G Foods, Inc. (BGS - Free Report) has a Zacks Rank #2, and a trailing four-quarter earnings surprise of 9.3%, on average.
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Campbell (CPB) to Gain From At-home Dining Trends in 2021
Increased at-home dining practices are among the many lifestyle changes triggered by the coronavirus pandemic, thanks to the enhanced social-distancing norms. Industry experts believe such habits are likely to prevail even after the pandemic subsides, as consumers have begun realizing the health benefits of cooking and dining at home. Well, the trend is likely to be an upside for several food industry players, including Campbell Soup Company (CPB - Free Report) .
Markedly, this Zacks Rank #3 (Hold) company kicked off fiscal 2021 on a solid note with stellar first-quarter results. Both earnings and sales cruised past the Zacks Consensus Estimate and advanced year over year, reflecting sturdy volume growth on skyrocketing demand. Apart from this, the company has been gaining from cost-saving initiatives and investments in brand growth. We note that shares of Campbell have gained 3.3% in the past three months compared with the industry’s rise of 5.3%.
That said, let’s take a closer look at the factors impacting this well-known convenience food products company’s performance.
Volume Growth to Remain a Key Catalyst
During first-quarter fiscal 2021, Campbell’s top line rose 7% year on year, while organic net sales (excluding the impact from the European chips business divestiture in fiscal 2020) advanced 8%. Organic sales gained from solid volume in the Meals & Beverages and the Snacks segments. Remarkably, volumes were driven by rising demand as at-home consumption has been high amid the pandemic. Also, volumes gained from enhanced retailer soup inventories.
Notably, Campbell’s Snacks business, which accounts for a considerable chunk of its revenues, has been witnessing rapid growth, lately. Excluding the impact of the European chips business divestiture, organic sales in the snacks segment climbed 4% during the fiscal first quarter on growth in the company’s power brands. Management highlighted that demand for unique and differentiated snacks was high during the first quarter as at-home consumption shot up.
The company expects the elevated demand scenario to continue, and is also focused on undertaking increased brand investments. Accordingly, it expects net sales and adjusted EBIT in the second quarter to increase in the band of 5-7% each, year-on-year. Furthermore, the company envisions adjusted EPS in the range of 81-83 cents per share that indicates growth of 12-15% from the adjusted earnings per share of 72 cents reported in the year-ago quarter.
Markedly, the Zacks Consensus Estimate for sales in the second quarter is currently pegged at 2.3 billion, indicating a rise of 6.2% from the prior year quarter. The consensus mark for earnings is currently pegged at 84 cents, reflecting a rise of 16.7% from the figure reported in the prior-year quarter.
Wrapping Up
We note that Campbell has been struggling with cost inflation for a while now. During the first quarter of fiscal 2021, gross margin was partly impacted by rise in net supply-chain expenses, which resulted from cost inflation and costs associated with COVID-19. Nevertheless, we expect Campbell’s prudent cost-saving efforts to help fight off the high input cost hurdles. Speaking of savings initiatives, during the first quarter, Campbell generated savings worth $15 million, which included synergies associated with the Snyder’s-Lance buyout. With this, the company has generated total program-to-date savings of $740 million. Management anticipates cumulative annualized savings from continuing operations of $850 million by fiscal 2022-end.
These factors, along with consumers’ inclination toward at-home consumption, as well as Campbell’s strategic efforts toward product innovation and brand building are likely to continue fueling its performance.
Looking for Solid Food Stocks? Check These
The Hain Celestial Group, Inc. (HAIN - Free Report) , carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 24.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conagra Brands Inc. (CAG - Free Report) , also with a Zacks Rank of 2, has a long-term earnings growth rate of 7%.
B&G Foods, Inc. (BGS - Free Report) has a Zacks Rank #2, and a trailing four-quarter earnings surprise of 9.3%, on average.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>