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Here's Why Campbell Soup (CPB) is an Appropriate Pick Now

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Campbell Soup Company CPB is a preferred pick for investors, courtesy of its robust growth strategies. The company has been benefiting from its portfolio refinement efforts and strong snacks business. Moreover, this renowned convenience foods provider is on track with its cost-saving initiatives.

Incidentally, shares of this Zacks Rank #2 (Buy) company have surged 47.6% in the past year compared with the industry’s growth of 18.4%. Let’s take a closer look at the factors aiding Campbell Soup’s growth.

Portfolio Refinement Moves to Drive Growth

Campbell Soup has been undertaking robust steps to strengthen its snacks brands. This is evident from the company’s portfolio review, after which management stated that it aims to become a leading snacks and simple meals firm. It is on track to transform the overall portfolio into a fast-growing snacking category, which is expected to form about half of Campbell Soup’s proforma sales in the future.

Markedly, Campbell Soup acquired Snyder's-Lance in the third quarter of fiscal 2018, which is enhancing the performance of the global biscuits and snacks portfolio. Evidently, sales in the Snacks division went up 2% to $989 million in first-quarter fiscal 2020. The segment gained from advancements in Pepperidge Farm cookies, Kettle Brand potato chips, Goldfish crackers, Cape Cod and fresh bakery products. Going ahead, management expects that brands under the snacking category will continue to boost performance on enhanced marketing and innovation.

On the flip side, Campbell Soup concluded the sale of Arnott’s and certain International operations to a New York-based private equity firm, KKR (KKR), in December 2019. Further, it exited Campbell Fresh in fiscal 2019 and Kelsen Group on Sep 23, 2019. Additionally, the company divested its European chips business in October last year. These actions are likely to enable it to focus on areas with greater potential like its businesses in the North American market — Campbell Snacks and Campbell Meals & Beverages.

Robust Savings Effort Bodes Well

Campbell Soup is progressing well with its cost-saving plan, which was announced in fiscal 2015. The company’s strategy of concentrating on supply-chain efficiencies along with curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. During first-quarter fiscal 2020, Campbell Soup generated savings worth $45 million as part of its multi-year, cost-saving program. This included synergies associated with the Snyder’s-Lance buyout. With this, the company has generated total program-to-date savings of $605 million. Moreover, management expects to generate cumulative annualized savings from continuing operations of $850 million by fiscal 2022 end.

These factors along with Campbell Soup’s prudent investments and strategic efforts toward portfolio restructuring as well as brand building are likely to help the company maintain a strong footing in the food space.

Looking for Other Food Stocks? Check These

Post Holdings, Inc. POST, which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lamb Weston Holdings Inc. (LW - Free Report) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 8.8%.

Kellogg Company K, which carries a Zacks Rank #2, has a long-term earnings growth rate of 6%.

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