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Solid Snacks Unit & Saving Efforts Drive Campbell Soup (CPB)

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Campbell Soup Company (CPB - Free Report) has been benefiting from strength in its Snacks business and focus on innovation. The branded convenience food products provider’s solid brand portfolio has been a major driver. Management is on track with its cost-saving efforts to counter the rising inflationary environment.

The upsides mentioned above drove CPB’s first-quarter fiscal 2023 results, with net sales and earnings rising year over year and beating the Zacks Consensus Estimate. Management expects 7-9% net sales growth, with 7-9% organic sales growth during fiscal 2023. Adjusted earnings per share (EPS) is envisioned to be up 2-5% to come in at $2.90-$3.00 during this time.

Let’s discuss the factors driving Campbell Soup’s performance.

Snacks Business Solid

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The Zacks Rank #2 (Buy) company is benefiting from its growing Snacks business. The segment contributed 43.5% to the company’s top line in the first quarter of fiscal 2023. Net sales in the division rose 15% (also organically) to $1,120 million. The upside can be attributed to sales of power brands which rose 21%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers and in salty snacks, Snyder's of Hanover pretzels and Kettle Brand and CapeCod potato chips. Inflation-driven pricing and sales allowances were somewhat offset by soft volume and higher promotional spending.

Campbell Soup’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.

Savings Plan on Track

Campbell Soup has been progressing well with its cost-saving plan. The company’s strategy of concentrating on supply-chain efficiencies, curtailing costs and reinvesting part of these savings in high-growth potential areas is noteworthy. In the first quarter of fiscal 2023, the company generated $10 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies, bringing total program-to-date cost savings to $860 million. Management is on track to deliver savings worth $1 billion by fiscal 2025-end.

Wrapping Up

Campbell Soup has been struggling with cost inflation for a while. In the first quarter of fiscal 2023, its adjusted gross profit margin contracted 30 basis points to 32.2% due to continued cost inflation, increased other supply chain costs and unfavorable volume/ mix

Management expects to keep witnessing cost inflation throughout fiscal 2023. That said, the company is undertaking pricing actions, among other efforts, to mitigate the impact of inflation.

CPB’s stock has gained 16.8% in the past year against the industry’s 1% decline.

Other Top-Ranked Food Bets

Some other top-ranked stocks are Conagra Brands (CAG - Free Report) , Lamb Weston (LW - Free Report) and Mondelez International, Inc. (MDLZ - Free Report) .

Conagra, a consumer-packaged goods food company, currently sports a Zacks Rank #1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Conagra’s current fiscal-year sales and earnings suggests growth of 7.2% and 12.7%, respectively, from the corresponding year-ago reported figures.

Lamb Weston, which is a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 52.6%, on average.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests an increase of 19.6% and 90.4%, respectively, from the year-ago reported number.

Mondelez International, which manufactures, markets, and sells snack food and beverage products, carries a Zacks Rank 2. MDLZ has a trailing four-quarter earnings surprise of  7.5%, on average.

The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 9% and 7.5%, respectively, from the corresponding year-ago reported figures.

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