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Campbell (CPB) Q3 Earnings Top Estimates, Sales Rise Y/Y

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Campbell Soup Company (CPB - Free Report) reported impressive third-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Net sales and earnings surpassed the Zacks Consensus Estimate. Results gained from solid demand for the company’s products with consumption rising 4% year over year and up 14% on a three-year basis.

During the quarter, the company generated $840 million in total savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies. Management remains on track to deliver savings worth $1 billion by fiscal 2025-end.

Considering the impressive year-to-date performance, management pulled up its fiscal 2022 net sales. The company reiterated its adjusted earnings before interest and taxes (EBIT) and adjusted earnings per share (EPS) view, thanks to the continued escalated inflation projection.

Campbell Soup Company Price and EPS Surprise

 

Campbell Soup Company Price and EPS Surprise

Campbell Soup Company price-eps-surprise | Campbell Soup Company Quote

 

Quarterly Highlights

Adjusted earnings from continuing operations increased 37% year over year to 70 cents per share and surpassed the Zacks Consensus Estimate of 61 cents. The upside resulted from higher adjusted EBIT, reduced adjusted net interest expense and gains from a lower number of weighted average diluted shares outstanding.

Net sales of $2,130 million increased 7% year over year and surpassed the Zacks Consensus Estimate of $2,035.4 million. Organic net sales grew 9% year over year. Inflation-driven pricing and sales allowances to the tune of 11% more than offset the volume dip of 3%. Volume decline was led by select supply constraints and price elasticities, despite some retailer inventory rebuild.

The company's adjusted gross margin expanded 90 basis points to 31.5%. The upside was driven by inflation-led pricing actions, supply chain productivity improvements and cost savings initiatives. Management highlighted that margin expansion reflects a gradual rebound of the major year-to-date impact of escalated cost inflation and other macro issues like labor and materials availability. Volume/mix was hurt by lower operating leverage in the quarter.

Adjusted EBIT grew 23% to reach $321 million, mainly due to better adjusted gross margin performance and reduced marketing and selling expenses. These were somewhat offset by sales volume declines and reduced adjusted other income.

Segment Analysis

Meals & Beverages: Net sales increased 6% year over year to $1,131 million. Organic sales increased 9% owing to increases in U.S. soup, foodservice and Prego pasta sauces. These were somewhat offset by declines in Canada. Inflation-driven pricing and sales allowances were somewhat offset by higher promotional spending. Volumes were hurt by supply hurdles related to labor and materials availability. Operating earnings in the unit jumped 18%.

Snacks: Net sales in the division rose 8% (also organically) to $999 million. Sales of power brands increased 13%. Snacks sales grew on the back of increases in salty snacks, mainly Snyder's of Hanover pretzels and KettleBrand potato chips, as well as in cookies and crackers, mainly due to Goldfish crackers. Total inflation-driven pricing and sales allowances and reduced promotional spending were somewhat offset by soft volumes. Volume in the unit was hurt by supply constraints based on materials availability and price elasticities. Segmental operating earnings increased 25%.

Other Financial Details

As of May 1, 2022, Campbell's total cash and cash equivalents stood at $196 million, long-term debt was $3,998 million and total equity amounted to $3,395 million. CPB generated $1,101 million as cash flow from operations in the nine months ended May 1, 2022. Capital expenditures amounted to $179 million in the said period.

In the nine months ended May 1, 2022, management paid out dividends worth $340 million and repurchased nearly 2.7 million shares worth $116 million. The company had nearly $425 million remaining in its existing $500-million share repurchase program at the end of the third quarter. This is in addition to the $173-million remaining under the anti-dilutive share repurchase program.

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Fiscal 2022 Guidance

Campbell Soup is raising its fiscal 2022 net sales guidance to reflect solid year-to-date performance, projection of persistent solid demand for its products and limited price elasticities amid escalated inflation. The revised view also considers ongoing supply recovery and better service levels. For fiscal 2022, the company expects net sales to be flat to up 1%, with organic sales growth between 1% and 2%. Earlier, the company had anticipated net sales of flat to down 2%, with organic sales between down 1% and up 1%. Adjusted EBIT is still forecast to be down 4.5-1.5%. Adjusted EPS are envisioned in the range of $2.75-$2.85 for fiscal 2022, reflecting flat to down 4%.

Shares of this Zacks Rank #3 (Hold) company have gained 9.3% in the past three months compared to the industry's growth of 0.5%.

3 Solid Staple Stocks

Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Medifast (MED - Free Report) and Sysco Corporation (SYY - Free Report) .

Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year EPS suggests growth of almost 43% from the year-ago reported number.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #1. MED has a trailing four-quarter earnings surprise of 12.9%, on average.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.

Sysco, which engages in the marketing and distributing of various food and related products, carries a Zacks Rank #2 (Buy). SYY has a trailing four-quarter earnings surprise of 9.1%, on average.

The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.