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Campbell Soup Tops Estimates

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Campbell Soup Company (CPB - Free Report) reported robust fiscal 2011 fourth-quarter adjusted earnings of 43 cents per share, beating the Zacks Consensus Estimate of 37 cents and year-ago results of 33 cents per share.

During the quarter, net sales inched up 5.9% from the prior-year quarter to $1,607.0 million, marginally beating the Zacks Consensus Estimate of $1,572.0 million. The increase was primarily due to 2.0% spike in price and sales allowances and favorable currency translations of 5.0%, partially offset by a negative impact from volume and mix of 2.0%.

Segment Analysis

The company has decided to report the results of operations in five reportable segments, i.e. U.S. Simple Meals, U.S. Beverages, Global Baking and Snacking, International Simple Meals and Beverages and North America Foodservice. U.S. Soup, Sauces and Beverages have been separated as U.S. Simple Meals and U.S. Beverages.

The Baking and Snacking segment has been renamed as Global Baking and Snacking while International Soup, Sauces and Beverages segment has been renamed as International Simple Meals and Beverages.

Sales at the U.S. Simple Meals division fell 8.0% year over year to $431.0 million, primarily due to adverse volume and mix, partially offset by decreased promotional spending. Sales of U.S. Soup declined 9.0% as sales of condensed, ready-to-serve soups and broth sales declined 10.0%, 5.0% and 11.0%, respectively.

Sales at the U.S. Beverages division inched down 1.0% year over year to $176.0 million, primarily due to adverse impact of increased promotional spending and price and sales allowance, partially offset by favorable volume and mix partially.

Campbell's Global Baking and Snacking segment posted a sharp growth of 17.0% year over year to $559.0 million, mainly attributable to favorable currency translations, increased volume and pricing, partially offset by higher promotional spending. The company witnessed higher sales of cookies and crackers, and a good performance at Pepperidge Farm.

The International Simple Meals and Beverages also recorded a 12.0% sales growth to $316.0 million, driven by higher sales in Europe and Canada along with volume gains and favorable currency impact. However, the increase in segment sales was partially offset by increased promotional spending and decreased sales in Asia Pacific region and Latin America.

North America Foodservice division's quarterly sales grew 10.0% year over year to $125.0 million. The increase was primarily attributable to higher volumes, decreased promotions and favorable foreign exchange rates, partially offset by a negative impact from pricing.

Operating Metrics

During the quarter, Campbell's gross margin contracted 60 basis points (bps) to 39.8% from 40.4% in the year-ago period, primarily due to an increase in plant cost and cost inflation, partially offset by productivity improvements, reduced promotional spending and higher selling prices.

Adjusted EBIT inched up 24.0% to $307.0 million, primarily driven by better performance at Global Baking and Snacking, International Simple Meals and Beverages and North America Foodservice divisions coupled with decreased selling and marketing and administrative expenses and favorable impact from currency, partially offset by an decrease in gross margin and reduction in sales volumes.


Campbell ended the quarter with cash and cash equivalents of $484.0 million compared with $254.0 million in the prior-year period. Long-term debt was $2,427.0 million. Year to date, the company generated $1,142.0 million of cash from operations.

Year-to-date, the company bought back 21 million shares for a total cost of $728.0 million and completed its strategic share repurchase program announced in June 2008. In June 2011, Campbell has announced a $1.0 billion share repurchase program with no expiration date.

Restructuring Program

On June 28, 2011 Campbell Soup marked a series of initiatives to enhance its supply chain efficiency and reduce overhead costs. Under its new restructuring plan, the company will make new investments, and will outsource and close some operations.

Campbell is expected to eliminate a total of approximately 770 positions across the organization by incurring total pre-tax costs of approximately $75.0 million. This represents about 4% of the company's global workforce of 18,400. The company is planning to cut jobs by the end of July 2011. These initiatives are expected to generate annual pre-tax savings of approximately $63.0 million in fiscal 2012 and $70.0 million in fiscal 2014.


Looking ahead, Campbell expects sales to increase in the range of 0.0% to 2.0% in fiscal 2012. The company forecasts adjusted earnings for the fiscal to decline at a clip of 5.0% to 7.0% from the adjusted base of $2.54 per share.

Campbell Soup operates in a highly competitive food industry and experiences worldwide competition in all of its principal products from such well-established rivals, such as General Mills Inc. (GIS - Free Report) , H. J. Heinz Company and Dole Foods Company Inc. .

Currently, Campbell Soup currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Neutral recommendation.

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