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Robust Snacks Unit Aids Campbell Soup (CPB), Costs Woes Hurt
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Campbell Soup Company’s (CPB - Free Report) Snacks business is thriving, driven by consumers’ rising demand. Though the company continues to face cost inflation, its strategic pricing actions and cost-saving plans have been offering some relief.
Let’s delve deeper.
Snacks Business Drives Growth
The Zacks Rank #3 (Hold) company has been benefiting from its growing Snacks business. In the fourth quarter of fiscal 2023, net sales in the division rose 8% (up 9% organically). The upside can be attributed to sales of power brands, up 13%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers, Lance sandwich crackers and salty snacks like Kettle Brand and Cape Cod potato chips. Favorable net price realization contributed to the upside. Management expects the Snacks business to keep delivering solid top and margin momentum driven by the Snyder 's-Lance acquisition.
Cost Woes: A Hurdle
Campbell Soup has been battling cost inflation and increased supply-chain costs, which is marring its margin performance. In the fiscal fourth quarter, the company’s adjusted gross margin contracted 70 basis points (bps) due to the adverse volume/mix, ongoing cost inflation and increased supply-chain costs. Management exited the quarter with core inflation of 6% and expects the metric to be in the low-single-digit in fiscal 2024. Also, higher adjusted marketing and selling expenses have been a deterrent.
Image Source: Zacks Investment Research
Pricing & Savings Offer Some Respite
Solid pricing initiatives have been aiding Campbell Soup amid an inflationary environment. This was seen in the fiscal fourth quarter, with organic net sales rising 5% on inflation-driven net price realization and solid in-market performance, stemming from robust supply-chain investments and effective marketing and selling investments.
The company’s strategy of concentrating on supply-chain efficiencies along with curtailing costs and reinvesting part of these savings in areas with high-growth potential is noteworthy. Through the fiscal fourth quarter, it generated $890 million in savings under its multi-year cost-saving program, including Snyder ’s-Lance synergies. Management is on track to deliver savings worth $1 billion by fiscal 2025-end.
Shares of the company have dropped 14.4% compared with the industry’s 17% decline.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.2% and 189.3%, respectively, from the corresponding year-ago reported figures.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 11.3% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 2.2% from the corresponding year-ago reported figure.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial year earnings suggests growth of 8.9% from the year-ago reported figure.
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Robust Snacks Unit Aids Campbell Soup (CPB), Costs Woes Hurt
Campbell Soup Company’s (CPB - Free Report) Snacks business is thriving, driven by consumers’ rising demand. Though the company continues to face cost inflation, its strategic pricing actions and cost-saving plans have been offering some relief.
Let’s delve deeper.
Snacks Business Drives Growth
The Zacks Rank #3 (Hold) company has been benefiting from its growing Snacks business. In the fourth quarter of fiscal 2023, net sales in the division rose 8% (up 9% organically). The upside can be attributed to sales of power brands, up 13%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers, Lance sandwich crackers and salty snacks like Kettle Brand and Cape Cod potato chips. Favorable net price realization contributed to the upside. Management expects the Snacks business to keep delivering solid top and margin momentum driven by the Snyder 's-Lance acquisition.
Cost Woes: A Hurdle
Campbell Soup has been battling cost inflation and increased supply-chain costs, which is marring its margin performance. In the fiscal fourth quarter, the company’s adjusted gross margin contracted 70 basis points (bps) due to the adverse volume/mix, ongoing cost inflation and increased supply-chain costs. Management exited the quarter with core inflation of 6% and expects the metric to be in the low-single-digit in fiscal 2024. Also, higher adjusted marketing and selling expenses have been a deterrent.
Image Source: Zacks Investment Research
Pricing & Savings Offer Some Respite
Solid pricing initiatives have been aiding Campbell Soup amid an inflationary environment. This was seen in the fiscal fourth quarter, with organic net sales rising 5% on inflation-driven net price realization and solid in-market performance, stemming from robust supply-chain investments and effective marketing and selling investments.
The company’s strategy of concentrating on supply-chain efficiencies along with curtailing costs and reinvesting part of these savings in areas with high-growth potential is noteworthy. Through the fiscal fourth quarter, it generated $890 million in savings under its multi-year cost-saving program, including Snyder ’s-Lance synergies. Management is on track to deliver savings worth $1 billion by fiscal 2025-end.
Shares of the company have dropped 14.4% compared with the industry’s 17% decline.
Other Solid Picks
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.2% and 189.3%, respectively, from the corresponding year-ago reported figures.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 11.3% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 2.2% from the corresponding year-ago reported figure.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 7.3%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial year earnings suggests growth of 8.9% from the year-ago reported figure.