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Campbell Soup (CPB) Poised on Snacks Unit, Strategic Execution

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Campbell Soup Company (CPB - Free Report) appears to be well-placed for 2024. One of the key driving forces behind the company’s success has been its Snacks business, which accounted for an impressive 44.2% of total sales in the first quarter of fiscal 2024. Strong execution of its strategic plan also positions CPB well for continued success amid cost inflation and a volatile consumer landscape.

Robust Snacks Division

Net sales in the Snacks division rose 1% on an organic basis during the first quarter. The upside can be attributed to sales of power brands, which rose 5%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers and Lance sandwich crackers. Favorable net price realization contributed to the upside, which was partially offset by volume/mix declines.

Management’s Direct Store Delivery (DSD) transformation initiative is expected to fuel further growth and margins in the Snacks division. This is expected to be achieved through three core elements, including the creation of one snacking DSD logistics and warehouse network, the modernization of tools and technology used by the company’s important independent distribution partners and a focus on DSD routes.


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Strategic Moves in Place

The company's emphasis on product affordability, competitive pricing, sustained marketing and innovation initiatives, and disciplined spending with a focus on high Return on Investment are key areas of focus. This approach, combined with resilient performance across the supply chain, successful innovations, and effective marketing programs, has contributed to recent improvements in share trends.

Campbell Soup expects continued momentum, especially in the second half of fiscal 2024, driven by the pending acquisition of Sovos Brands and ongoing strategic initiatives. The company expects modest earnings and margin improvements in fiscal 2024, mainly weighted to the second half. This reflects a moderating inflationary landscape, together with ongoing productivity enhancements. For fiscal 2024, adjusted EBIT is forecasted to be up 3-5%. Adjusted EPS is envisioned to increase 3-5% to the $3.09-$3.15 band.

Navigating the Challenges

While the company’s cost savings plan has generated $895 million in savings through the first quarter of fiscal 2024, elevated costs, particularly inflation and increased marketing expenses, pose challenges. The company anticipates moderate inflation in fiscal 2024, with core inflation staying within the low-single-digit range.

Navigating a challenging consumer landscape, Campbell Soup expects sequential improvements in fiscal 2024 but foresees volume declines in the first half.  Also, net sales are likely to reflect lower contributions from pricing and disciplined promotion levels.

All said, Campbell Soup's focus on its Snacks business, coupled with strategic initiatives and a resilient execution plan, positions the company for growth despite the abovementioned challenges. Shares of the Zacks Rank #3 (Hold) company have gained 9.3% in the past three months compared with the industry’s rise of 12%.

3 Promising Bets

Sysco Corporation (SYY - Free Report) , a food and related product company, currently carries a Zacks Rank #2 (Buy). SYY delivered a back-to-back positive earnings surprise in the past two quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and nearly 8%, respectively, from the year-ago reported numbers.

Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered a positive earnings surprise of 23.9% in the last reported quarter.

The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 24.7%, respectively, from the year-ago reported numbers.

Nomad Foods (NOMD - Free Report) manufactures, markets, and distributes a range of frozen food products. It currently has a Zacks Rank #2. NOMD has a trailing four-quarter earnings surprise of 7.7%, on average.

The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales suggests growth of 6.6% from the year-ago reported figure.

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