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Campbell (CPB) Benefits from Rising Demand, Hurt by Costs
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Growth in at-home dining trends amid the coronavirus pandemic is an upside for several food companies. Campbell Soup Company (CPB - Free Report) is not an exception to this trend. Markedly, favorable demand conditions have been aiding growth across the company’s segments. However, pandemic-led high input costs have been a roadblock for the company.
High At-Home Consumption Trends is an Upside
Campbell’s Meals & Beverages and the Snacks segments have been witnessing sturdy volume growth, driven by rising demand as at-home consumption remained high amid the pandemic. Also, enhanced retailer soup inventories have been aiding volume growth. Well, these upsides drove organic sales growth of 8% during first-quarter fiscal 2021. Campbell’s Snacks business, which accounts for a considerable chunk of its revenues, has been witnessing rapid growth lately. Management highlighted that demand for unique and differentiated snacks have been high amid the pandemic.
Industry experts believe that at-home dinning and snacking trends are likely prevail, as consumers continue to work from home. This is likely to keep fueling demand conditions in the food space. In fact, Campbell is undertaking brand investments to meet consumer’s needs effectively. Notably, the company expects net sales in the second quarter to increase in the band of 5-7% year on year. Furthermore, the company envisions adjusted earnings per share (EPS) in the range of 81-83 cents per share that indicates growth of 12-15% from the adjusted EPS of 72 cents reported in the year-ago quarter.
Rising Costs are Concerns
We note that Campbell is struggling with cost inflation for a while now. During the first quarter, gross margin was partly impacted by rise in net supply-chain expenses, which resulted from cost inflation and costs associated with COVID-19. Additionally, elevated marketing investments and adjusted administrative expenses were a drag on the company’s adjusted EBIT performance in the first quarter. Such downsides are exerting pressure on the stock, which declined 4.5% in the past three months against the industry’s rise of 3.6%
Wrapping Up
We expect Campbell’s prudent cost-saving efforts to help fight off high input-cost hurdles. Such measures along with strategic efforts toward product innovation and brand building are likely to boost investor’s optimism in the stock in the forthcoming periods.
Darling Ingredients Inc. (DAR - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.3%, on average.
The Hain Celestial Group, Inc. (HAIN - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Campbell (CPB) Benefits from Rising Demand, Hurt by Costs
Growth in at-home dining trends amid the coronavirus pandemic is an upside for several food companies. Campbell Soup Company (CPB - Free Report) is not an exception to this trend. Markedly, favorable demand conditions have been aiding growth across the company’s segments. However, pandemic-led high input costs have been a roadblock for the company.
High At-Home Consumption Trends is an Upside
Campbell’s Meals & Beverages and the Snacks segments have been witnessing sturdy volume growth, driven by rising demand as at-home consumption remained high amid the pandemic. Also, enhanced retailer soup inventories have been aiding volume growth. Well, these upsides drove organic sales growth of 8% during first-quarter fiscal 2021. Campbell’s Snacks business, which accounts for a considerable chunk of its revenues, has been witnessing rapid growth lately. Management highlighted that demand for unique and differentiated snacks have been high amid the pandemic.
Industry experts believe that at-home dinning and snacking trends are likely prevail, as consumers continue to work from home. This is likely to keep fueling demand conditions in the food space. In fact, Campbell is undertaking brand investments to meet consumer’s needs effectively. Notably, the company expects net sales in the second quarter to increase in the band of 5-7% year on year. Furthermore, the company envisions adjusted earnings per share (EPS) in the range of 81-83 cents per share that indicates growth of 12-15% from the adjusted EPS of 72 cents reported in the year-ago quarter.
Rising Costs are Concerns
We note that Campbell is struggling with cost inflation for a while now. During the first quarter, gross margin was partly impacted by rise in net supply-chain expenses, which resulted from cost inflation and costs associated with COVID-19. Additionally, elevated marketing investments and adjusted administrative expenses were a drag on the company’s adjusted EBIT performance in the first quarter. Such downsides are exerting pressure on the stock, which declined 4.5% in the past three months against the industry’s rise of 3.6%
Wrapping Up
We expect Campbell’s prudent cost-saving efforts to help fight off high input-cost hurdles. Such measures along with strategic efforts toward product innovation and brand building are likely to boost investor’s optimism in the stock in the forthcoming periods.
Looking for Food Stocks? Check These
Sanderson Farms, Inc. , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 48.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Darling Ingredients Inc. (DAR - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.3%, on average.
The Hain Celestial Group, Inc. (HAIN - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>