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Are Campbell Soup's (CPB) Efforts Drawing Enough Attention?

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Campbell Soup Company (CPB - Free Report) , the manufacturer of branded convenience food products, remains focused on enhancing its bottom line, increasing return on investment through strategic frameworks, overseas expansion, and growth of healthy beverages and baked snacks.

Further, with a view to synchronize its organizational structure and key growth strategies, Campbell Soup realigned its reporting segments from five to three, effective first-quarter fiscal 2016. With this reorganization, the company aims to craft a meaningful scale, and establish clearly defined portfolio roles and growth targets, which will be linked to each segment’s function in the organization and opportunities in the marketplace.  

Additionally, the company has adopted a major cost savings initiative that comprises streamlining of organization, launch of Integrated Global Services and the initiation of zero-based budgeting in fiscal 2016. The entire initiative is likely to generate cost savings of $200–$250 million over a period of three years.

Moreover, in an attempt to enhance its brand portfolio and accelerate future growth, Campbell Soup has resorted to acquisitions and joint ventures. In this regard, the company acquired leading refrigerated salsa maker, Garden Fresh Gourmet in fiscal 2015. The acquisition, which makes Garden Fresh Gourmet part of Bolthouse Farms (acquired in fiscal 2014), is in line with the company’s aim to expand its packaged fresh and organic foods categories.

We are impressed with this Zacks Rank #3 (Hold) company’s robust first-quarter fiscal 2016 results, wherein both top and bottom lines beat the Zacks Consensus Estimate.

The company’s adjusted earnings from continuing operations of $0.95 per share were way ahead of the Zacks Consensus Estimate of $0.76 and increased 22% from the prior-year quarter. Though net sales fell nearly 2% to $2,203 million from $2,255 million in the prior-year quarter, it surpassed the Zacks Consensus Estimate of $2,201 million.

The company has raised its adjusted earnings per share guidance for fiscal 2016 to $2.75–$2.83, reflecting growth of 4% to 7% from $2.65 reported in fiscal 2015. Earlier, the company had projected earnings per share growth of 3–5%.

However, we remain skeptical about the company’s future performance due to its exposure to international markets. This exposure makes Campbell Soup prone to currency fluctuations. Though the company’s earnings and sales surpassed expectations in first-quarter fiscal 2016, the top line fell year over year mainly on account of adverse foreign currency translations.

Further, citing an increased impact of currency translations in fiscal 2016, Campbell Soup has lowered its sales guidance for the fiscal. The company now anticipates sales growth between negative 1% and flat against the previous forecast of 0–1% growth.

Stocks to Consider

Some better-ranked tocks in the same sector are Omega Protein Corporation , Boulder Brands, Inc. and Lancaster Colony Corporation . Each of these stocks carries a Zacks Rank #1 (Strong Buy).

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