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Campbell Soup's (CPB) Emerald Nuts Divestiture to Fuel Growth

Campbell Soup Company CPB has been strategically focused on fueling growth in its Snacks business as well as power brands. As part of this strategy, the company unveiled the divestiture of its Emerald nuts business to Flagstone Foods.

Management expects no material impact from this divestiture on fiscal 2023 financial results. However, the deal is likely to be dilutive to the bottom line by nearly 1 cent in fiscal 2024.

CPB had taken over Emerald nuts in 2018 as part of its Snyder’s-Lance buyout. Emerald nuts delivered net sales worth $66 million in fiscal 2022 while generating $46 million for the nine-month period ended Apr 30, 2023. The sale of this business is likely to help Campbell Soup increase its focus on its growing Snacks business.

Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company price-consensus-eps-surprise-chart | Campbell Soup Company Quote

Snacks Business Emerges Strong

Campbell Soup has been benefiting from its growing Snacks business. In the second quarter of fiscal 2023, net sales in the company’s Snacks division rose 15% (also organically) to $1,077 million. The upside can be attributed to sales of power brands, which rose 20%. Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers, Pepperidge Farm cookies and salty snacks and Snyder's of Hanover pretzels, among others.

Favorable net price realization and volume/mix increases contributed to the upside. Segmental operating earnings increased 24%. For the company’s Snacks business, in-market dollar consumption increased 20% in the aggregate in all eight power brands. Management is on track to drive solid momentum on innovation for its snack brands.

What Else to Know?

Campbell Soup’s strategy of concentrating on supply-chain efficiencies, curtailing costs and reinvesting part of these savings in areas with high-growth potential is noteworthy. In the second quarter of fiscal 2023, CPB generated $10 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies, bringing total program-to-date cost savings to $870 million. Management remains on track to deliver savings worth $1 billion by the fiscal 2025-end.

These factors, along with Campbell Soup’s prudent investment and strategic efforts toward product innovation and brand building, bode well.

On its second-quarter fiscal 2023 earnings call, management increased its full-year net sales outlook and pulled up the midpoint of the adjusted EBIT and adjusted earnings per share (EPS) outlook. The company’s higher revenue expectations reflect strength in brands, favorable price elasticities and continued supply-chain execution.

For fiscal 2023, Campbell Soup now expects 8.5-10% net sales and organic sales growth. Adjusted EBIT is now forecast to be up 4.5-6.5%. Adjusted EPS is now envisioned to be up 3.5-5% to come in the band of $2.95-$3.00.

This Zacks Rank #2 (Buy) stock has increased 7.2% in the past year compared with the industry’s growth of 6.2%.

3 Other Solid Food Stocks

Some other top-ranked stocks are Lamb Weston LW, Conagra Brands CAG and General Mills GIS.

Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 116.8% from the year-ago reported number.

Conagra Brands, which operates as a consumer-packaged goods food company, currently sports a Zacks Rank #1. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.

The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests
increases of 7.1% and 16.5%, respectively, from the year-ago reported numbers.

General Mills, a food and beverage product company, currently has a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.

The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.

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