Campbell Soup Company ( CPB Quick Quote CPB - Free Report) appears well poised for growth, thanks to its business strategies, brand strength, particularly Snacks business, and a cost-saving initiative. In a latest release, management unveiled the next phase of Campbell Soup’s growth strategy to realize its full potential and cash in on the robust consumer trends. Detailing Strategies
Campbell Soup showed a smooth progress in its transformation in the last three years, followed by the next phase of its strategic plan. The new phase includes long-term goals to maximize shareholder value. We note that CPB looks well placed for growth on the back of three major aspects, comprising its differentiated portfolio, distinguished path to value creation, and advanced capabilities including marketing, innovation and e-commerce.
CPB’s Snacks unit has been standing out for a while now. This business is likely to tap incremental sales, backed by a proven growth model with strength in the power snacks brands and higher innovation. Management looks forward to enhancing its power brands’ distribution and channel presence to grow revenues by $200 million. Campbell Soup’s 90% of the Meals & Beverages unit comprises soups, sauces and plant-based beverages with all categories exhibiting strength of late. CPB’s Win in Soup strategy also bodes well. Management outlined three important strategies to continue driving growth across the soup category. These priorities include reinforcing CPB’s portfolio with solid brands, such as Campbell Soup's, Well Yes!, Pacific Foods, Chunky and Swanson; modernizing efforts including new varieties and flavors; and significant innovation. Management further cited that the sauces business is likely to grow to a $1-billion franchise through a 3% annual sales growth rate in the core business with brand and unit extensions. Campbell Soup’s Italian and Mexican sauce businesses gain momentum and are expected to continue expanding the market share. In addition, CPB targets plant-based growth with its unique plant powered drink V8 and innovative offerings, such as V8 Plus Protein. The Pacific Foods brand is also performing impressively. Long-Term Goals
Aforesaid endeavors will aid Campbell Soup to deliver organic net sales growth of 2%, adjusted EBIT of 4-6% and adjusted EPS of 6-8%. Management projects average annual growth from fiscal 2022 through fiscal 2025, buoyed by core expansion and enhanced innovation. Solid growth and a disciplined capital-deployment strategy are anticipated to fuel adjusted EPS growth.
Per management, Campbell Soup will increase its enterprise cost-saving program from $850 million to $1 billion by fiscal 2025 end. Snacks margin improvement program will drive cost savings. Moving on, CPB remains committed to a discreet capital approach. From fiscal 2022 to fiscal 2025, management targets producing more than $4 billion operating cash, which will be used in driving shareholder returns. Campbell Soup boasts ample liquidity and flexibility including $1.85 billion available under its existing revolving credit facility. These factors will help Campbell Soup maximize its shareholder value. Given its balance-sheet strength, management intends to shift its capital-allocation priorities from debt reduction to a greater balanced approach. CPB looks forward to making capital investments to support its brand portfolio and achieve profitable growth; undertake prudent buyouts; maintain a competitive dividend; and repurchase shares through the previously-announced $250 million anti-dilutive share buyback program and a $500-million strategic repurchase plan. Image Source: Zacks Investment Research
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