Tags: Campbell | Soup | growth | CPB

Campbell Soup: Nicely Profitable, No Growth

By    |   Tuesday, 06 Mar 2012 08:25 AM

Campbell Soup Company (CPB) poses an interesting dilemma for investors. The company is profitable but in an extended period of no or slow growth. Is there value in soup for investors?

Campbell Soup develops and markets its name-brand soups and what the company calls "simple meals." Owned brands include Pepperidge Farms, V8, Swanson and Arnott’s.

Campbell Soup and its iconic red-and-white cans hold 60 percent of the U.S. wet-soup market. The company includes soups in its simple meals segment. Other tracked segments are global baking and snacks, U.S. beverages, international simple meals and beverages and North American food service.

The U.S. simple meals (soups) segment accounts for about 40 percent of revenue and almost 50 percent of operating earnings.

The 2012 fiscal year second quarter for Campbell Soup closed on Jan. 29. For the half-year, the company reported revenue of $4.27 billion, down from $4.30 billion a year earlier.

Net income for the six months was $1.45 per share, down from $1.53. For the full 2012 fiscal year, management guidance is for revenue to be flat compared to 2011 and an earnings per share decline of between 5 percent and 7 percent.

The Wall Street consensus earnings estimate for the fiscal year is $2.37 per share.

Refocused on brand


To return the company to profitable growth, Campbell Soup management has implemented a plan of brand-building with a larger commitment to advertising and marketing, up 6 percent in the 2012 second quarter. The company also is working to innovate, launching new products in the beverage segments.

Campbell’s dividend yield is 3.5 percent at the current share price. The dividend had increased steadily since the start of the company's 2005 fiscal year.

However, the dividend rate was not increased to start out 2012. With a $10 billion market cap, Campbell Soup also could be a takeover candidate for a larger food company looking to add brand names.

The analysts at Morgan Stanley recently initiated coverage on Campbell Soup with an underweight rating. Of the 16 analysts covering the stock, 13 have rated CPB a hold and there is only one buy rating.

The company next reports on May 23.

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2012-25-06
Tuesday, 06 Mar 2012 08:25 AM
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