Can Campbell's (CPB) Growth Efforts Lift Its Performance?
Zacks Investment Research | Jun 02, 2017 04:32AM ET
Like other manufacturers and marketers of convenience food products, Campbell Soup Company’s (NYSE:CPB) top-line was dented by the changing preferences of consumers. Apart from tough macroeconomic conditions the company’s C-Fresh division has long been troubled by the Bolthouse Farms product recall.
This was witnessed in the third quarter of fiscal 2017, wherein Campbell succumbed to both earnings and sales miss. In addition to missing estimates, earnings and sales also fell year over year. (Read More: Campbell Soup Q3 Earnings & Sales Miss, Alters View ).
We observed that Campbell’s shares have slipped 4.1% in the last one year, underperforming the Zacks categorized Food–Miscellaneous/Diversified industry’s decline of 1.1% in the same period. These factors have compelled Campbell to tweak its fiscal 2017 sales view. Consequently, the Zacks Consensus Estimate for the fiscal has trended downwards.
Nevertheless, this Zacks Rank #3 (Hold) company has been striving to revive sales through their stringent cost savings plan that had been announced in fiscal 2015. It anticipates cost savings worth $450 million by fiscal 2020-end. In this regard, Campbell generated savings of $20 million in the third quarter, which fared better than management’s expectations. Confidence in the cost saving program led the company to raise the lower end of its EPS and EBIT views.
Further in an attempt to achieve profitable and sustainable growth the company has been undertaking efforts such as increased level of transparency in food manufacturing, portfolio diversification, advertising via mobile and digital devices, and globally strengthen the presence of its snacks brands. In line with such growth initiatives the company has recently invested $10 million in Chef’d, an online meal store. The investment is expected to enhance Campbell’s e-commerce and data analytics business models.
All said investors need to wait and watch if Campbell’s growth moves aid in improving its top-line performance, amidst the tough consumer landscape.
Until then, investors can count on some better-ranked stocks in the same industry that includes; Aramark (NYSE:ARMK) , MGP Ingredients, Inc. (NASDAQ:MGPI) and McCormick & Company, Incorporated (NYSE:MKC) all carrying Zacks Rank #2 (Buy). You can see
Aramark had an average earnings surprise of 4.5% in the trailing four quarters and long term earnings growth rate of 12.8%.
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MGP Ingredients had an average earnings surprise of 29.0% in the trailing four quarters and long term earnings growth rate of 15%.
McCormick & Company had an average earnings surprise of 3.1% in the trailing four quarters and long term earnings growth rate of 8.8%.
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