More than a month has gone by since the last earnings report for Campbell Soup Company (CPB - Free Report) . Shares have added about 1.9% in that time frame.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Campbell Misses on Q4 Earnings & Sales
Campbell Soup posted fourth-quarter fiscal 2017 results, wherein adjusted earnings of 52 cents per share jumped 13% year over year, though it fell short of the Zacks Consensus Estimate of 55 cents. Including one-time items, Campbell reported earnings of $1.04 per share, against a loss of 26 cents recorded in the year-ago quarter.
Net sales of $1,664 million slipped 1% and also lagged the Zacks Consensus Estimate of $1,689 million, mainly owing to soft organic sales. Organic sales dipped 1% on account of lower volumes.
Nonetheless, the company’s adjusted gross margin grew 80 basis points to 36.9%, thus reverting to its expansion trend after last quarter’s downside. The gross margin growth was mainly accountable to productivity enhancements and benefits from cost-curtailing efforts, somewhat negated by cost inflation and escalated supply chain expenses.
Moreover, adjusted EBIT for the quarter advanced 11% to $282 million, thanks to reduced marketing and selling costs, and improved gross margin. This was somewhat marred by soft sales.
Campbell reports its results under three segments, namely, Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.
Americas Simple Meals and Beverages: In fourth-quarter fiscal 2017, sales at the division dipped 3% year over year to $815 million, on account of softness in V8 beverages and soup sales. During the quarter, sales for U.S. soup dropped 4%, on account of a drop in broth, ready-to-serve soups and condensed soups.
Global Biscuits and Snacks: Sales at this division remained flat at $624 million, as Pepperidge Farm snacks strength across Australia was countered by weakness in Indonesia.
Campbell Fresh: Sales at this segment climbed 1% to $225 million on the back of greater Garden Fresh Gourmet sales, along with strength across carrots and carrot ingredients. This was partially offset by soft sales of Bolthouse Farms refrigerated beverages, which continued being hurt by supply constraints.
Campbell ended the quarter with cash and cash equivalents of $319 million, long-term debt of $2,499 million and total shareholders’ equity of $1,645 million. Further, the company generated $1,291 million as cash flow from operations during fiscal 2017.
Fiscal 2018 Outlook
Management remains impressed with some key achievements of fiscal 2017. These include raising the company’s multi-year cost-savings goal to $450 million by 2020. The company also anticipates significant gains from its pending buyout of Pacific Foods. Finally, Campbell remains focused on getting its C-Fresh division back to growth path, by solving the problems related to capacity constraints. With solid focus on cost savings and its core strategic imperatives, Campbell remains well-placed for long-term growth.
However, given a tough operating environment, management expects sales growth for fiscal 2018 to range from negative 2% to flat. Adjusted EBIT growth is anticipated in a range of negative 1% to 1% increase. Adjusted earnings per share growth is envisioned in the range of flat to 2% rise, to $3.04-$3.11.
Currency headwinds are expected to have a nominal impact on the company’s fiscal 2018 performance.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted downward by 7% due to these changes.
At this time, Campbell Soup's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is more suitable growth investors than value investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.