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Campbell (CPB) Q3 Earnings Beat, Stock Down on EPS View Cut

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Campbell Soup Company (CPB - Free Report) posted third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate and improved year over year. However, sales came almost in line with the estimates.

Further, shares of the company lost 10.8% in the pre-market trading as management trimmed its earnings guidance for fiscal 2018. In the last three months, this Zacks Rank #3 (Hold) stock has declined 24.2%, wider than the industry’s fall of 9.2%.


Q3 Highlights

Adjusted earnings of 70 cents per share increased 18.6% year over year and outpaced the Zacks Consensus Estimate of 60 cents. Including one-time items, Campbell incurred loss per share of $1.31 per share compared to earnings of 58 cents in the year-ago quarter.

Net sales of $2,125 million grew 14.7% and came almost in line with the Zacks Consensus Estimate of $2,128 million. The year-over-year improvement was owing to gains from buyouts of Snyder’s-Lance and Pacific Foods as well as currency tailwinds. Further, organic sales remained flat with year-ago quarter as declines in the Americas Simple Meals and Beverages division was compensated with gains from the Global Biscuits and Snacks, and Campbell Fresh segments.

Furthermore, the company’s adjusted gross margin contracted 3.9 percentage points to 32%. The decline was mainly due to cost inflation, escalated supply chain expenses and promotional spending as well as the dilutive effect from recent buyouts. This was somewhat negated by productivity improvements as well as gains from cost savings.

Moreover, adjusted EBIT in the quarter was up 1% to $308 million. However, excluding the impact from the recent buyouts, adjusted EBIT fell mainly due to lower gross margin, partly offset by reduced adjusted administrative expenses and, adjusted marketing and selling costs.

Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company Price, Consensus and EPS Surprise | Campbell Soup Company Quote


Segment Analysis

The Latin America business is managed as part of the Global Biscuits and Snacks segment starting from fiscal 2018. Earlier, this division formed part of the Americas Simple Meals and Beverages segment.

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 third-quarter fiscal 2018, sales at the division rose 5% year over year to $1,010 million backed by gains from Pacific Foods buyout. However, the segment’s organic sales were down 2% mainly due to softness across Plum products, V8 Beverages and U.S. soup. Excluding gains from the Pacific Foods buyout, sales at U.S. soup dipped 1% on account of a drop in condensed soups, somewhat offset by broth and ready-to-serve soups sales.

Global Biscuits and Snacks: Sales at this division surged 35% at $862 million. Excluding gains from the Snyder’s-Lance’s buyout and currency translations, organic sales grew 1% owing to strength in Pepperidge Farm snacks, representing growth in Goldfish crackers and Pepperidge Farm cookies.

Campbell Fresh: Sales at this segment rose 1% to $251 million, mainly by gains from refrigerated soup. However, sales of Bolthouse Farms refrigerated beverages remained flat with the year-ago period.


Campbell ended the quarter with cash and cash equivalents of $199 million, total debt of $9,843 million and total equity of $1,411 million. Additionally, the company generated $1,024 million as cash flow from operations in the first nine months of fiscal 2018.

Fiscal 2018 Outlook

Campbell has completed the buyout of Snyder’s-Lance, Inc. in the reported quarter. This acquisition is likely to aid the company in fortifying its snacking brands’ portfolio, thus making it a snacking leader. However, it has been witnessing challenges related to the execution along with some external headwinds. Nevertheless, management has been considering its strategic plans and portfolio composition, which should enhance the company’s operating performance and boost shareholder value.

Following the quarterly results, management trimmed its earnings forecast for fiscal 2018, while updated sales and adjusted EBIT views to include the effects from Snyder’s-Lance’s buyout. The company now projects sales growth to range from positive 10-11% compared with negative 1% to positive 1% guided earlier. Further, adjusted EBIT is expected to decline in the band of 6-8% compared with prior guidance of decrease in the range of 5-7%.

Adjusted earnings are now envisioned in the band of $2.85-$2.90 per share, reflecting decline of 5-6% from fiscal 2017. The Zacks Consensus Estimate is currently pegged at $3.12, which is likely to witness a downward revision. Earlier, management projected earnings per share in the $3.10-$3.17 band, which reflected growth of 2-4% from last year.

Campbell carries a Zacks Rank #3 (Hold).

Looking For Top-Ranked Stocks? Check These

Medifast, Inc. (MED - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Natural Foods, Inc. (UNFI - Free Report) has a Zacks Rank #2 (Buy) and a long-term earnings growth rate of 8.2%.

Lamb Weston Holdings, Inc. (LW - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 12%. Further, the company pulled off an average positive earnings surprise of nearly 9% in the last four quarters.

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