Campbell Soup (CPB, Financial) recently announced its first-quarter results that topped consensus estimates on both the top as well as bottom lines. It had encouraging organic sales growth across its portfolio particularly for U.S. Simple Meals and Global Baking and Snacking. Also, better customer execution, innovation, stronger seasonal sales look promising; that should generate higher profit for the company in the current quarter.
Campbell Soup reported net sales of $2.26 billion, a rise of 4% as compared to the net sales of $2.17 billion in the same quarter a year ago. Also, its net income grew 9% to $368 million or earnings of $0.74 per share as against $337 million or earnings of $0.66 per share in the corresponding period last year. The consensus was estimating earnings of $0.72 per share on the revenue of $2.22 billion.
Strong outlook
According to a report, the global market for soups, sauces and dressings is expected to grow at the rate of 2.1% per year to reach $331 billion by the end of fiscal 2015. Moreover, the outlook for baked food remains strong in the future. The global industry analysis expects the global baked goods industry to grow more than $310 billion by the end of fiscal 2015. This expected growth in baked food and pastry goods are driving growth on the back of changing lifestyle that is leading to less time for conservative cooking at homes.
This strong outlook should certainly turn out to be a tailwind for the company going forward. Also, Campbell remains strong with its offerings in these market segments. It is making significant moves to expand its presence in the fast growing premium soups portfolio. The company has recently launched new Slow Kettle varieties for its wet soup categories. Looking ahead, Campbell remains on track to launch six additional varieties of its organic soup in easier-to-open cartons in the current quarter.
Also, Campbell expects its U.S simple meals to remain strong growth drivers for its performance in Sauce going forward. The company is seeing strong momentum for its newly launched Prego, Pace and Campbell's dinner sauces. It is also focusing on expanding its dinner sauces platform. It has recently launched Oven Sauces that should certainly leverage its dinner sauce platform that includes Skillet and Slow Cooker pouches. Moreover, its newly launched Oven Sauces are gaining traction in the market. It has received a quick 52% ACV. In fact, its dinner sauces now enjoy more than 80% ACV in the United States.
Acquisitions to accelerate its growth prospects
Campbell expects its acquisitions to gear up its performance going forward. It has acquired Bolthouse Farms, Plum Organics and Kelsen in the last two years. These acquisitions have started contributing to its growth and are expected to remain strong in the future.
Campbell expects Kelsen Group to remain one of the key growth drivers in its snack business. This acquisition was primarily made in order to expand its global snacks business. At present, Kelsen receives 40% of its sales of baked snacks from China and Hong Kong. Also, the company was able to meet its own guidance for this category that looks promising in the future. Besides, it is expanding its distribution in key cities in China and Hong Kong that should increase its sales going forward. Kelsen Group at present receives more than 40% of its sales of baked snacks from China and Hong Kong.
Meanwhile it is also seeing growth in the Pepperidge Farm business that comprises of Goldfish franchises and fresh bakery. Further, it is aggressively concentrating on this business and has increased advertisement, consumer promotion and better-quality in-store merchandising. This should enhance its growth in the future.
Moreover, the company remains committed to expand the distribution for its Bolthouse products that should accelerate sales for its premium beverages. The company remains solid to increase sales for its V8 V-Fusion and V8 vegetable juice platform. It is expected to launch V8 veggie blends in January in calendar year 2015. This anticipated launch should help the company to tap into juicing trends by offering nutritious affordable juicing that is convenient for the consumer.
Campbell has additionally stretched its V8 veggie blends. It has recently brought in a new category called V8 protein shakes and bars. The company has directed this category to tap extra share in the adult on-the-go nutrition, which is certainly a multibillion-dollar opportunity.
Conclusion
Campbell looks good with its growth prospects that should yield strong returns to its investors and create value for its shareholders over the years. Though the stock remains little expensive with the trailing P/E of 16.26 and forward P/E of 17.48 but it has promising future. Its profit and operating profit margins are 10.53% and 15.40% for the trailing twelve months. Its balance sheet carries total cash of $239.0 million and has total debt of $4.07 billion. Also, it has operating cash flow of $1.05 billion and leverage free cash flow of $693.25 billion.
