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Campbell Soup (CPB) Gains on Robust Strategies Amid High Costs

Campbell Soup Company’s CPB success story hinges on making notable strides in advancing its strategic plan, showcasing its resilience amid a challenging and evolving consumer landscape.

The company’s strategies and plans concentrate on three key areas — ensuring product affordability and competitive pricing within margin goals, sustaining marketing and innovation initiatives, and adhering to a disciplined and balanced spending approach with a focus on high ROI and impactful plans.

This Zacks Rank #3 (Hold) stock has shown impressive performance, driven by the mentioned upsides. Over the past three months, it recorded a notable increase of 9.1%, surpassing the industry's growth of 2.3%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s Dig Deeper

Campbell Soup is well poised for growth, driven by its portfolio strength, which gains from innovation and acquisitions like Sovos Brands. Notably, Rao's has been aiding Sovos Brands, demonstrating its premium brand equity with consumers. This acquisition is a considerable step for CPB as it enhances its Meals & Beverages portfolio with high-growth brands like Rao’s sauce, Michael Angelo’s and noosa.

The company has been benefiting from its Snacks business, which formed 43.7% of total sales in the second quarter of fiscal 2024. Net sales in the division rose 1% on an organic basis during the quarter. The upside can be attributed to sales of eight power brands, which rose 4%.

Despite a tough economic landscape, sales grew. The uptick was fueled by strength in brands like Goldfish, Lance, Kettle Brand and Cape Cod. Management’s DSD transformation initiative is expected to fuel further growth and margins in the Snacks division. This is expected to be achieved through three core elements, including the creation of one snacking DSD logistics and warehouse network, the modernization of tools and technology used by CPB’s important independent distribution partners and a focus on DSD routes.

Campbell Soup has been benefiting from its strategy of concentrating on supply-chain efficiencies, along with curtailing costs and reinvesting part of these savings in areas with high-growth potential. Through the second quarter of fiscal 2024, it generated $915 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies. Management remains on track to deliver savings worth $1 billion by fiscal 2025-end.

Are All Signs Positive for Campbell Soup?

CPB has been grappling with elevated cost inflation and other supply-chain costs for a while now. It witnessed core inflation in low-single digits during the second quarter. Management continues to expect core inflation to stay within the low-single-digit range in fiscal 2024.

Looking ahead to fiscal 2024, management plans to maintain investments in brand-related activities. It envisions marketing and selling expenses to fluctuate in the 9-10% band, as a percentage of net sales, with a higher spending expected in the third quarter compared with the fourth quarter.

Apart from this, CPB has been navigating a volatile consumer landscape. Macroeconomic headwinds are likely to continue affecting certain categories and consumer demographics in the near term. For fiscal 2024, the company expects net sales growth to be down 0.5% to up 1.5%. Organic sales growth is likely to be flat to up 2%.

On its second-quarter earnings call, management stated that the company was pacing toward the lower end of fiscal 2024 net sales view, with expectations to witness a sequential improvement throughout the year. For the third quarter, management expects a flat to low-single-digit increase in organic sales, with a continued sequential increase anticipated in the fourth quarter.

Nonetheless, the above-mentioned strategies and accomplishments showcase the strength of the brand and its ability to drive growth amid a dynamic landscape. These focus areas are likely to aid sequential improvement throughout fiscal 2024, driving momentum in revenues and profit margins in the second half of the fiscal year. For fiscal 2024, adjusted EBIT is forecast to be up 3-5% and adjusted EPS is envisioned to increase 3-5% to the $3.09-$3.15 band.

3 Picks You Can’t Miss Out On

Here, we have highlighted three better-ranked stocks, namely and Vita Coco Company COCO, Colgate-Palmolive CL and Hormel Foods HRL.

Vita Coco Company, which develops, markets and distributes coconut water products, currently sports a Zacks Rank #1 (Strong Buy). COCO has a trailing four-quarter earnings surprise of 25.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vita Coco Company’s current financial-year sales and earnings suggests growth of 3.5% and 37.8%, respectively, from the year-ago reported numbers.

Colgate-Palmolive, which manufactures and sells consumer products, currently carries a Zacks Rank #2 (Buy). CL delivered an earnings surprise of 4.4% in the trailing four quarters, on average.

The Zacks Consensus Estimate for Colgate-Palmolive’s current fiscal-year sales and earnings suggests growth of 3.9% and 9.3%, respectively, from the year-ago reported numbers.

Hormel Foods develops, processes and distributes various meat, nuts and other food products. It currently carries a Zacks Rank #2. HRL has a trailing four-quarter earnings surprise of 3.5%, on average.

The Zacks Consensus Estimate for Hormel Foods’ current financial-year sales suggests growth of 1.2% from the year-ago reported number.

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