Campbell's Is M-M-M-M Good For Your Portfolio

Campbell Soup Co.

reported earnings this morning that beat Wall Street estimates, but shares are down on a weak equity market open. The company reported earnings of 57 cents per share on revenues of $1.81 billion, better than Wall Street estimates of 52 cents per share on $1.81 billion in revenues. The company, which is based in Camden, N.J., said that sales in its U.S. soup, sauce and beverage unit fell 8%. The company said that it expects revenues to rise 3-5%, up from a previous estimates of 2-4%. Denise Morrison, Campbell's Chief Operating Officer, said, “This quarter we reported a modest increase in sales and EBIT and a significant improvement in earnings per share growth, with three of our four reporting segments contributing to this performance. While we are encouraged by our progress, we are not satisfied with this performance and clearly have more work to do. “After heavy discounting in U.S. soup during the first half, we began shifting our marketing investments in the third quarter toward brand building initiatives. Over time we anticipate that these efforts, combined with accelerated and targeted innovation, will improve price realization and strengthen brand equity. Sales of our beverage products softened this quarter compared to very strong results a year ago. We have a pipeline of healthy beverage innovations to build on our track record of growth. In Baking and Snacking, our second-largest segment, we continued to deliver strong performance with double-digit sales increases and strong bottom-line results this quarter.” Morrison concluded, “We remain focused on our plans to stabilize and then profitably grow net sales, and we are stepping up our game across the company with plans that include innovation, brand marketing excellence, superior consumer insights and relentless cost management.” As the market appears to be shifting into a more defensive posture, Campbell's will benefit or be hurt less than high flying stocks, as money has to be put somewhere. Shares are not cheap at these levels, trading at 14 times earnings, but shares do sport a safe dividend, yielding 3.3%. The company said that gross margin fell from last year, as inflation and plant costs partially offset by productivity improvements. It looks as if inflation is starting to abate a bit here in the second quarter, so margins may stabilize here, and look to rebound towards the latter part of fiscal 2011. Earnings before interest and taxes rose from last year, which is a strong sign, especially, given the lower sales volumes and gross margin decline we saw this quarter. Campbell's may not be the sexiest name out there, but it should provide some warmth in your portfolio, especially on this rainy Monday morning.