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Why Is Campbell (CPB) Down 10.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Campbell Soup (CPB - Free Report) . Shares have lost about 10.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Campbell due for a breakout? 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 drivers.
Campbell Soup's Q2 Earnings, Revenues Top Estimates
Campbell Soup released second-quarter fiscal 2020 results. Adjusted earnings from continuing operations increased 11% year over year to 72 cents and surpassed the Zacks Consensus Estimate of 65 cents. The upside was backed by higher adjusted EBIT and reduced interest expenses.
Net sales came in $2,162 million in the quarter. The company had reported a net sales figure of $2,172 million in the year-ago quarter. Further, the top line surpassed the Zacks Consensus Estimate of $2,155 million.
Moving on, adjusted gross margin improved 150 basis points to 34.4% on the back of cost-saving efforts, productivity enhancements and gains from favorable product mix. This was partly negated by cost inflation. Adjusted EBIT rose 4% to $364 million, driven by higher gross margin.
Segment Analysis
Meals & Beverages: Sales in this division were flat year over year at $1,224 million. Notably, Prego pasta sauces and U.S. soup performed well during the quarter that was partly offset by declines in beverages. Also, U.S. soup sales inched up 1% courtesy of gains across broth and condensed soups. This was partly offset by declines in ready-to-serve soups. The segment’s organic sales were flat year over year.
Further, operating earnings in the Meals & Beverages segment declined 4% to $242 million due to increased marketing and administrative costs.
Snacks: Sales in this division declined 1% to $938 million. Nevertheless, organic sales improved 2%. The segment gained from advancements in Pepperidge Farm cookies, Kettle Brand, Goldfish crackers and Cape Cod. The upside was partially offset by declines in fresh bakery products as well as the partner brands in Snyder’s-Lance portfolio. Operating earnings in this category increased 3% to $136 million as improved gross margin were offset by elevated marketing expenses.
Financials
Campbell ended the quarter with long-term debt of $4,919 million and total equity of $2,499 million. Additionally, the company generated $663 million as net cash from operating activities in six months ended Jan 26, 2020. Campbell paid out dividends worth $213 million during the first half of fiscal 2020 at the rate of 35 cents per share.
Other Developments & Fiscal 2020 Outlook
During the quarter under review, Campbell generated savings worth $45 million as part of its multi-year, cost-saving program, which included synergies associated with the Snyder’s-Lance buyout. With this, the company has generated total program-to-date savings of $650 million. Further, management continues to anticipate cumulative annualized savings from continuing operations of $850 million by fiscal 2022-end.
Campbell revised its adjusted earnings per share (EPS) guidance for fiscal 2020 on the back of lower adjusted net interest expenses stemming from reduced debt along with an impressive EBIT momentum through the first half of the fiscal. Campbell now expects adjusted EPS in the range of $2.55-$2.60, which indicates growth of 11-13%. Earlier, management envisioned EPS to grow 9-11% to $2.50-$2.55.
Further, Campbell reaffirmed its guidance for net sales and organic net sales as well as adjusted EBIT. For fiscal 2020, net sales are projected between a decline of 1% and an increase of 1%. Organic net sales are also expected in the same range as net sales. Adjusted EBIT is still expected to rise 2-4%.
The guidance for fiscal 2020 takes into consideration gains from an additional 53rd week.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.36% due to these changes.
VGM Scores
Currently, Campbell has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Campbell has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Campbell (CPB) Down 10.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Campbell Soup (CPB - Free Report) . Shares have lost about 10.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Campbell due for a breakout? 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 drivers.
Campbell Soup's Q2 Earnings, Revenues Top Estimates
Campbell Soup released second-quarter fiscal 2020 results. Adjusted earnings from continuing operations increased 11% year over year to 72 cents and surpassed the Zacks Consensus Estimate of 65 cents. The upside was backed by higher adjusted EBIT and reduced interest expenses.
Net sales came in $2,162 million in the quarter. The company had reported a net sales figure of $2,172 million in the year-ago quarter. Further, the top line surpassed the Zacks Consensus Estimate of $2,155 million.
Moving on, adjusted gross margin improved 150 basis points to 34.4% on the back of cost-saving efforts, productivity enhancements and gains from favorable product mix. This was partly negated by cost inflation. Adjusted EBIT rose 4% to $364 million, driven by higher gross margin.
Segment Analysis
Meals & Beverages: Sales in this division were flat year over year at $1,224 million. Notably, Prego pasta sauces and U.S. soup performed well during the quarter that was partly offset by declines in beverages. Also, U.S. soup sales inched up 1% courtesy of gains across broth and condensed soups. This was partly offset by declines in ready-to-serve soups. The segment’s organic sales were flat year over year.
Further, operating earnings in the Meals & Beverages segment declined 4% to $242 million due to increased marketing and administrative costs.
Snacks: Sales in this division declined 1% to $938 million. Nevertheless, organic sales improved 2%. The segment gained from advancements in Pepperidge Farm cookies, Kettle Brand, Goldfish crackers and Cape Cod. The upside was partially offset by declines in fresh bakery products as well as the partner brands in Snyder’s-Lance portfolio. Operating earnings in this category increased 3% to $136 million as improved gross margin were offset by elevated marketing expenses.
Financials
Campbell ended the quarter with long-term debt of $4,919 million and total equity of $2,499 million. Additionally, the company generated $663 million as net cash from operating activities in six months ended Jan 26, 2020. Campbell paid out dividends worth $213 million during the first half of fiscal 2020 at the rate of 35 cents per share.
Other Developments & Fiscal 2020 Outlook
During the quarter under review, Campbell generated savings worth $45 million as part of its multi-year, cost-saving program, which included synergies associated with the Snyder’s-Lance buyout. With this, the company has generated total program-to-date savings of $650 million. Further, management continues to anticipate cumulative annualized savings from continuing operations of $850 million by fiscal 2022-end.
Campbell revised its adjusted earnings per share (EPS) guidance for fiscal 2020 on the back of lower adjusted net interest expenses stemming from reduced debt along with an impressive EBIT momentum through the first half of the fiscal. Campbell now expects adjusted EPS in the range of $2.55-$2.60, which indicates growth of 11-13%. Earlier, management envisioned EPS to grow 9-11% to $2.50-$2.55.
Further, Campbell reaffirmed its guidance for net sales and organic net sales as well as adjusted EBIT. For fiscal 2020, net sales are projected between a decline of 1% and an increase of 1%. Organic net sales are also expected in the same range as net sales. Adjusted EBIT is still expected to rise 2-4%.
The guidance for fiscal 2020 takes into consideration gains from an additional 53rd week.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.36% due to these changes.
VGM Scores
Currently, Campbell has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Campbell has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.