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Campbell (CPB) Q1 Earnings Surpass Estimates, Sales Miss
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Campbell Soup Company (CPB - Free Report) has reported first-quarter fiscal 2022 results, wherein the bottom line beat the Zacks Consensus Estimate, while the top line lagged the same. Both metrics declined year over year. Industry-wide supply-chain disruptions more than offset benefits from solid consumer demand, positive pricing and improved productivity.
Management retained the overall fiscal 2022 view. It also noted that the bottom line will likely grow year over year in the second half of fiscal 2022. The company remains on track with its multi-year cost-saving program, with $15 million generated in the fiscal first quarter. It expects savings of $850 million by the end of fiscal 2022.
Quarterly Highlights
Adjusted earnings from continuing operations tumbled 12% year over year to 89 cents per share but surpassed the Zacks Consensus Estimate of 81 cents. The downside was a result of reduced adjusted EBIT.
Net sales of $2,236 million decreased 4% year over year and missed the Zacks Consensus Estimate of $2,297 million. However, sales rose 2% from first-quarter fiscal 2020. Organic sales declined 4% year over year due to lower volumes, supply pressure and cycling retailer inventory recovery in the year-ago period. The metric grew 5% from first-quarter fiscal 2020.
The company's adjusted gross margin contracted 200 basis points to 32.5%. The downside was caused by higher promotions and unfavorable mix, which more than offset supply-chain productivity improvements and pricing efforts.
Adjusted EBIT plunged 15% to reach $389 million mainly on account of lower sales volumes, reduced adjusted gross margin and higher adjusted administrative expenses. This was more than offset by marketing and selling costs.
Campbell Soup Company Price, Consensus and EPS Surprise
Meals & Beverages: Net sales declined 7% year over year to $1,266 million, with organic sales declining 6%. The downside mainly resulted from volume declines in all U.S. retail products (including U.S. soup, Prego pasta sauces and V8 beverages) and in Canada.
Volumes in U.S. retail were hurt due to cycling retailer inventory recovery in the year-ago period and supply-chain issues. U.S. soup sales fell 2% due to weakness in condensed soups, and ready-to-serve soups. Operating earnings in the unit tanked 17%.
Snacks: Net sales in the division were down 1% to $970 million. The segment was hurt by lower volumes and higher promotions along with weakness in partner brands — Pop Secret popcorn and Late July snacks. Organic sales in the segment fell 1%. Segmental operating earnings declined 5%.
Other Financial Details
As of Oct 2, 2021, Campbell's total cash and cash equivalents stood at $69 million, long-term debt was $4,567 million, and total equity amounted to $3,237 million. The company generated $288 million as cash flow from operations in the quarter under review. Capital investments amounted to $69 million in the said period.
In the fiscal first quarter, management paid out dividends worth $116 million and repurchased 1.5 million shares worth $63 million. The company had $475 million remaining in its existing $500-million share repurchase program. This is in addition to the $250-million anti-dilutive share repurchase program announced in the third quarter of fiscal 2021, out of which $176 million worth of shares are remaining.
Fiscal 2022 Guidance
Despite the impressive quarterly results, management retained the guidance for fiscal 2022. The view also considers a solid demand, rising inflation and tightening of the labor market, which were somewhat offset by continued in-market momentum, better pricing, productivity and cost-saving efforts.
For fiscal 2021, the company expects net sales of flat to down 2%, with organic sales between down 1% and up 1%. The sale of Plum baby food and snacks business is expected to affect fiscal 2022 sales by 1 percentage point. Adjusted EBIT is forecast to be down 4.5-1.5% compared with an 8-5% decline mentioned earlier. Adjusted EPS is envisioned to be $2.75-$2.85 for fiscal 2022.
For second-quarter fiscal 2022, the company’s top line is likely to rise year over year. However, the gross margin is expected to remain under pressure due to inflation across commodities and higher labor-related costs. Despite lapping easier comparisons in the second half of fiscal 2022, Campbell Soup expects inflation of high-single digits, which is anticipated to be more pronounced in the second half. However, management is undertaking efforts, including positive net price realization, supply-chain productivity improvements, and cost-saving initiatives to mitigate cost inflation.
Shares of this Zacks Rank #3 (Hold) company have lost 3.1% in the past three months compared with the industry's decline of 1.8%.
Tyson Foods, a Zacks Rank #1 (Strong Buy) stock, has a trailing four-quarter earnings surprise of 25.2%, on average. Shares of the company have gained 9.9% in a year's time.
The Zacks Consensus Estimate for Tyson Foods' sales for the current financial year suggests year-over-year growth of 7.5%, while the same for earnings per share indicates a decline of 10.9% from the year-ago period. TSN has an expected long-term earnings growth rate of 7.5%. You can see the complete list of today's Zacks #1 Rank stocks here.
Albertsons Companies currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 37.6%, on average. Shares of Albertsons Companies have surged 124.8% in a year's time.
The Zacks Consensus Estimate for ACI's current financial-year sales suggests year-over-year growth of 3.6%. In comparison, the same for earnings per share indicates a decline of 16.7% from the year-ago period's reported figure. ACI has an expected long-term earnings growth rate of 12%.
Hormel Foods presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 0.7%, on average. Shares of Hormel Foods have gained 19.5% in a year's time.
The Zacks Consensus Estimate for HRL's sales and earnings per share for the current financial year suggests growth of 16.3% and 3%, respectively, from the year-ago period's reported numbers. HRL has an expected long-term earnings growth rate of 7.2%.
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Campbell (CPB) Q1 Earnings Surpass Estimates, Sales Miss
Campbell Soup Company (CPB - Free Report) has reported first-quarter fiscal 2022 results, wherein the bottom line beat the Zacks Consensus Estimate, while the top line lagged the same. Both metrics declined year over year. Industry-wide supply-chain disruptions more than offset benefits from solid consumer demand, positive pricing and improved productivity.
Management retained the overall fiscal 2022 view. It also noted that the bottom line will likely grow year over year in the second half of fiscal 2022. The company remains on track with its multi-year cost-saving program, with $15 million generated in the fiscal first quarter. It expects savings of $850 million by the end of fiscal 2022.
Quarterly Highlights
Adjusted earnings from continuing operations tumbled 12% year over year to 89 cents per share but surpassed the Zacks Consensus Estimate of 81 cents. The downside was a result of reduced adjusted EBIT.
Net sales of $2,236 million decreased 4% year over year and missed the Zacks Consensus Estimate of $2,297 million. However, sales rose 2% from first-quarter fiscal 2020. Organic sales declined 4% year over year due to lower volumes, supply pressure and cycling retailer inventory recovery in the year-ago period. The metric grew 5% from first-quarter fiscal 2020.
The company's adjusted gross margin contracted 200 basis points to 32.5%. The downside was caused by higher promotions and unfavorable mix, which more than offset supply-chain productivity improvements and pricing efforts.
Adjusted EBIT plunged 15% to reach $389 million mainly on account of lower sales volumes, reduced adjusted gross margin and higher adjusted administrative expenses. This was more than offset by marketing and selling costs.
Campbell Soup Company Price, Consensus and EPS Surprise
Campbell Soup Company price-consensus-eps-surprise-chart | Campbell Soup Company Quote
Segment Analysis
Meals & Beverages: Net sales declined 7% year over year to $1,266 million, with organic sales declining 6%. The downside mainly resulted from volume declines in all U.S. retail products (including U.S. soup, Prego pasta sauces and V8 beverages) and in Canada.
Volumes in U.S. retail were hurt due to cycling retailer inventory recovery in the year-ago period and supply-chain issues. U.S. soup sales fell 2% due to weakness in condensed soups, and ready-to-serve soups. Operating earnings in the unit tanked 17%.
Snacks: Net sales in the division were down 1% to $970 million. The segment was hurt by lower volumes and higher promotions along with weakness in partner brands — Pop Secret popcorn and Late July snacks. Organic sales in the segment fell 1%. Segmental operating earnings declined 5%.
Other Financial Details
As of Oct 2, 2021, Campbell's total cash and cash equivalents stood at $69 million, long-term debt was $4,567 million, and total equity amounted to $3,237 million. The company generated $288 million as cash flow from operations in the quarter under review. Capital investments amounted to $69 million in the said period.
In the fiscal first quarter, management paid out dividends worth $116 million and repurchased 1.5 million shares worth $63 million. The company had $475 million remaining in its existing $500-million share repurchase program. This is in addition to the $250-million anti-dilutive share repurchase program announced in the third quarter of fiscal 2021, out of which $176 million worth of shares are remaining.
Fiscal 2022 Guidance
Despite the impressive quarterly results, management retained the guidance for fiscal 2022. The view also considers a solid demand, rising inflation and tightening of the labor market, which were somewhat offset by continued in-market momentum, better pricing, productivity and cost-saving efforts.
For fiscal 2021, the company expects net sales of flat to down 2%, with organic sales between down 1% and up 1%. The sale of Plum baby food and snacks business is expected to affect fiscal 2022 sales by 1 percentage point. Adjusted EBIT is forecast to be down 4.5-1.5% compared with an 8-5% decline mentioned earlier. Adjusted EPS is envisioned to be $2.75-$2.85 for fiscal 2022.
For second-quarter fiscal 2022, the company’s top line is likely to rise year over year. However, the gross margin is expected to remain under pressure due to inflation across commodities and higher labor-related costs. Despite lapping easier comparisons in the second half of fiscal 2022, Campbell Soup expects inflation of high-single digits, which is anticipated to be more pronounced in the second half. However, management is undertaking efforts, including positive net price realization, supply-chain productivity improvements, and cost-saving initiatives to mitigate cost inflation.
Shares of this Zacks Rank #3 (Hold) company have lost 3.1% in the past three months compared with the industry's decline of 1.8%.
Stocks to Consider
We have highlighted some better-ranked stocks from the broader Consumer Staples space, namely Albertsons Companies (ACI - Free Report) , Hormel Foods (HRL - Free Report) , and Tyson Foods (TSN - Free Report) .
Tyson Foods, a Zacks Rank #1 (Strong Buy) stock, has a trailing four-quarter earnings surprise of 25.2%, on average. Shares of the company have gained 9.9% in a year's time.
The Zacks Consensus Estimate for Tyson Foods' sales for the current financial year suggests year-over-year growth of 7.5%, while the same for earnings per share indicates a decline of 10.9% from the year-ago period. TSN has an expected long-term earnings growth rate of 7.5%. You can see the complete list of today's Zacks #1 Rank stocks here.
Albertsons Companies currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 37.6%, on average. Shares of Albertsons Companies have surged 124.8% in a year's time.
The Zacks Consensus Estimate for ACI's current financial-year sales suggests year-over-year growth of 3.6%. In comparison, the same for earnings per share indicates a decline of 16.7% from the year-ago period's reported figure. ACI has an expected long-term earnings growth rate of 12%.
Hormel Foods presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 0.7%, on average. Shares of Hormel Foods have gained 19.5% in a year's time.
The Zacks Consensus Estimate for HRL's sales and earnings per share for the current financial year suggests growth of 16.3% and 3%, respectively, from the year-ago period's reported numbers. HRL has an expected long-term earnings growth rate of 7.2%.