Stock of the day 02/09/2015 – Campbell Soup Co

Will Campbell Soup serve up a steaming bowl of goodness with its Q4 2015 results on Thursday, or will it dish up a hot pile of, well, something far less savoury?

After opening the year at $44.12 the stock had soon climbed to £48 by the start of February, at that point an 18 month high for Campbell Soup. However, negative buzz surrounding its second quarter results at the end of the month helped contribute to a fall for Campbell Soup; first a profit warning in the middle of the month sapped the life out of the stock, before the promise of a $200 million a year cost cutting strategy failed to woo investors. The results themselves then sent the stock below $46 as Campbell Soup posted a 2% drop in sales to $2.23 billion alongside an 11% drop in earnings per share to $0.66.

The stock then languished between $45 and $46 throughout March, before poking its head above the parapet to reach $46 to $47 during April. Things then began to perk up in May ahead of the company’s third quarter report, despite news that American mega-store Target was going to spend less time promoting canned and packaged brands like Campbell Soup (and Kraft and Kellogg) in favour of healthier, fresher fare.


(Source: IT-Finance.com 02/09/2015)

The third quarter results themselves, announced on May 22nd, beat the admittedly low expectations, with unchanged earnings per share of $0.62, compared to the 18% drop to $0.51 expected, alongside a rise in gross margin to 35.9% from 34.3% year-on-year. It wasn’t all good new; its sales fell 3.6% to $1.90 billion against the $1.93 billion forecast, whilst net earnings dropped to $182 million from $184 million. However, it was enough to lift the stock to a fresh 2015 high of $48.38 by the end of May.

The stock rather abruptly tumbled from this high at the start of June, only for news of the company’s latest purchase to put Campbell Soup back on the right track. The company announced it had bought Garden Fresh Gourmet Inc, a salsa and hummus maker with impressive sales, for $231 million in order to enhance its position in the healthy (or at least healthier) foods market. This helped Campbell Soup remain between $47 and $48 for the following 6 weeks, before the stock surged across the final week of July and the start of August to hit an all-time high of $50.71 as investors were impressed by the company’s renewed commitment to being, in the words of CEO Denise Morrison, ‘more honest about what goes in our good’.

Of course, like so many stocks these gains were almost wiped out by the recent, China-inspired, volatility of the past fortnight or so, with Campbell Soup falling all the way back to a near 3 month low of $45.40. It is currently trading at $46.91 (It-Finance.com, 02/09/2015).

In terms of Campbell Soup’s fourth quarter results on Thursday, analysts are expecting earnings per share of $0.42 with $1.69 billion in revenue, leaving the stock with a consensus rating of ‘Hold’ and an average target price of $45.38.