High-quality foods and simple meals manufacturer,
Campbell Soup Company ( CPB )
recently reported fourth-quarter and fiscal 2012 financial results
and provided fiscal 2013 outlook. Quarterly adjusted earnings per
share came in at 41 cents and surpassed the Zacks Consensus
Estimate of 38 cents. However, the quarter's results witnessed a
decline of 5% from 43 cents reported in the comparable prior-year
During the reported quarter, net sales came in at $1,613 million
compared with $1,607 million in the prior-year quarter, and beat
the Zacks Consensus Estimate of $1,596 million. Benefit from the 3%
spike in price and sales allowances, as well as a 3% rise in volume
and mix were fully offset by negative impact from 3%increase in
promotional spending along with 3% currency fluctuations.
Higher input costs and promotional expenses, dragged down gross
margin rate to 38.5%, a contraction of 130 basis points from the
prior-year quarter level of 39.8%, partially offset by increased
selling prices and productivity enhancement.
In the quarter, marketing and selling expenses grew 5% to $206
million mainly due to increased advertising and promotional
expenses, increased selling expenses and rise in expenses to fund
innovative ideas, partially offset by a decline in currency.
Adjusted operating incomedeclined 10% to $208 million compared
with $232 million in the prior-year quarter, while adjusted
operating margin contracted 150 basis points to 12.9% from 14.4%
reported in the previous-year period. The fall was attributable to
lower gross margin, increase in marketing costs, partially offset
by sales volume growth.
Campbell's fiscal 2012 earnings per share came in at $2.44,
beating the Zacks Consensus Estimate of $2.40. However, earnings
declined 3.9% year over year from $2.54 reported for the fiscal
2011. Net sales for 2012 remained almost flat year over year at
$7,707 million, beating the Zacks Consensus Estimate of $7,699
U.S. Simple Meals: Fourth quarter sales
at this division grew 7% year over year to $461 million, driven by
a rise of 4% in volume and mix and 3% increase in price and sales
allowances. Sales of U.S. Soup jumped 9% as sales of condensed
soups increased 14% and sales of ready-to-serve soups inched up 1%.
An increase of 4% was witnessed in U.S. Sauces mainly due to volume
growth due to increased advertising and promotions.
During the quarter, operating income grew 3% to $104 million
compared with $101 million in the year-ago quarter, primarily
driven by sales growth in U.S. Soups and Sauces, partially offset
by increased promotional and advertisement expenses along with a
fall in gross margin.
U.S. Beverages: Sales at this division rose 3%
year over year to $181 million, due to rise in volume and mix. U.S
Beverages witnessed double-digit growth in "V8" Splash and
benefited from "V8" V-Fusion categories, whereas "V8" vegetable
juice declined on a year over year basis.
However, higher marketing costs along with fall in gross margin
led to a year-over-year decline of 16.7% in segment's operating
income to $25 million from $30 million reported in the prior-year
Global Baking and Snacking: This segment's
sales crept down 1% to $556 million. The results primarily suffered
due to 5% rise in advertisement and promotion expenses along with
3% negative impact from currency fluctuations partially offset by a
4% rise in price and allowances and a 3% positive impact from
volume and mix.
However, input cost and promotional expenditure led to a 10%
decline in segment's operating income to $83 million compared with
$92 million in the prior-year quarter, partially offset by
increased selling prices and productivity enhancements.
International Simple Meals and Beverages: Sales
of this segment came down 7% to $294 million, primarily due 4% rise
in promotional spending and 8% negative impact from currency
translation. This was partially offset by 4% increase in price and
sales allowance coupled with 2% rise in volume and mix.
Region wise, Canada witnessed a decline mainly due to weak
beverage sales and adverse effect of currency translation.
Excluding the adverse effect of currency translation in Europe,
increase in sales in France was offset by soft sales in Germany,
whereas in Asia Pacific region, higher sales in Japan and Malaysia
was offset by a fall in Australian soup.
Moreover, input cost and promotional expenditure resulted in
decline of 37.5% in the segment's operating income to $15 million
from $24 million in the year-ago period, partially offset by
increased selling price.
North America Foodservice: This division's
quarterly sales dropped 3% year over year to $121 million. Benefit
from price and sales allowances and favorable volume and mix were
fully offset by rise of 5% promotional expenses and a 1% negative
impact from currency fluctuations.
Operating income in the quarter fell $6 million to $10 million
mainly due to higher input cost and increased promotional
expenditure, partially offset by increased selling price and
Based on better-than-expected fourth-quarter and fiscal 2012
results, Campbell provided fiscal 2013 guidance, targeting sales
growth in the 10% to 12% range. The company shared its adjusted
earnings per share guidance of $2.51 to $2.57, reflecting an
increase of 3% to 5% from 2012 earnings per share of $2.44.
Adjusted operating income is anticipated to increase in the 4% to
Campbell Soup operates in a highly competitive food industry and
experiences worldwide competition in all its principal products
from such well-established rivals as General Mills
Inc. ( GIS ) and H. J. Heinz Co. ( HNZ
Currently, Campbell Soup retains Zacks #3 Rank, implying a
short-term 'Hold' rating for the next 1-3 months. Moreover, we
maintain our long-term 'Neutral' recommendation on the stock.
CAMPBELL SOUP (CPB): Free Stock Analysis Report
GENL MILLS (GIS): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
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