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Campbell Looks Appetizing for 2019 Despite Tumbling 28% YTD

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Campbell Soup Company’s (CPB - Free Report) unimpressive run may stop you from considering it as an investment option, but a closer look at its fundamentals might change your mind. Although the shares of this premium convenience food products provider have lost 28% this year compared with the industry’s decline of nearly 20%, one cannot ignore the stock’s robust endeavors and solid prospects. This is also nicely reflected by the company’s Zacks Rank #2 (Buy).



Campbell Looks Enticing  

Campbell is taking various actions to enhance the company’s performance and boost shareholders’ value. These actions form part of the company’s portfolio review and Board-led strategy. Markedly, Campbell plans to focus on two separate businesses in its key North American market — Campbell Snacks, and Campbell Meals and Beverages. Further, the company plans to divest non-key businesses — Campbell International (which includes Arnott’s and the Kelsen Group) and Campbell Fresh — to sharpen focus and enhance portfolio.

Banking on a more focused portfolio, management raised its cost-savings target for 2022 by $150 million to $945 million. The incremental savings are likely to come on the back of Campbell Soup’s efforts to streamline its structure, augment its zero-based budgeting endeavors and maintain focus on manufacturing network optimization. The updated savings target continues to take into consideration the expected savings of $500 million along with synergies and run-rate cost savings of nearly $295 million from Synder’s-Lance’s integration.

As mentioned above, focusing on strengthening the presence of its growing snacks brands is part of Campbell’s core strategies. Campbell is committed toward shifting its overall portfolio to the fast-growing snacking category, which is expected to form about half of Campbell’s proforma sales in future. Markedly, Campbell acquired Snyder's-Lance in the third quarter. This will help the company create a distinguished snacking business and enhance the performance of the global biscuits and snacks portfolio. Such constant efforts to expand the snacking category have also helped Campbell’s global biscuits and snacks business perform well.

Campbell is keen on boosting its portfolio through acquisitions. Apart from Snyder's-Lance, the company acquired leading organic broth and soup producer, Pacific Foods, in a drive to expand in the fast-growing organic food space. Notably, contributions from Snyder's-Lance and Pacific Foods drove Campbell’s top-line growth of 25% in first-quarter fiscal 2019. Apart from these, Campbell has purchased Bolthouse Farms and Garden Fresh Gourmet.

Considering a more focused portfolio, Campbell revised its targets for the long term, wherein it expects organic sales to grow 1-2%, adjusted EBIT to increase 4-6% and adjusted earnings to rise 7-9%. Further, management anticipates net debt to adjusted EBITDA ratio for 2021 to be 3.0x. All these factors along with focus on innovation present adequate reasons for investors to see potential in Campbell going into 2019. In fact, this may be the opportune moment for them to invest in the stock, which looks quite well positioned for the new year.

3 More Satiating Food Stocks

Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 19%, carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McCormick & Company (MKC - Free Report) has long-term earnings per share growth rate of 9% and a Zacks Rank #2.

Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 11.8%.

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