Stock of the day 21/05/2015 – Campbell Soup Co/Foot Locker Inc

With the earnings calendar looking increasingly sparse, there are only a few household names left to announce; it’s the turn of Foot Locker and Campbell Soup at the end of the week.

With a fresh pair of shoes on Foot Locker Inc has been on a bit of a run in 2015 ahead of its Q1 2015 earnings release on Friday. The company had a strong 2014, even if growth began to slow in the final quarter; after opening the year at $40.59, the stock reached a high of $57 in September, a price it couldn’t eclipse as it rung in 2015 at $56.40. However, 2015 has seen the stock resume its rally, and after hitting a low of $51.14 in the mid-January slump the stock managed to reach an all-time high of $63.64 at the end of March before besting this price by hitting an intraday high of $63.73 on Wednesday.


(Source: IT-Finance.com 21/05/2015)

Whilst the company is set to open a mega-store in the newly rebranded 8 Times Square building, and just announced on Wednesday a quarterly dividend of $0.25 to be paid on July 31st, it is Foot Locker’s hardcore growth that is proving to be the main attraction. In its fourth quarter and full year announcement at the start of March the company posted an 8% year-on-year increase in same store sales, a figure that helped push Foot Locker 4% higher and set it on its way to reaching its current all-time highs. The company also set out ambitious plans to reach $10 billion in yearly revenue by 2020, with the strength of Foot Locker’s outlook furthering investors’ faith in the company.

The numbers forecast for its upcoming first quarter results are similarly robust. Analysts are predicting a 10% increase in earnings per share from $1.11 to $1.22 year-on-year, with a 2% growth in revenue to $1.91 billion. With the company’s own confidence oozing into investors, and the fact that it has posted an annual profit increase of 16% over the past 4 years, analysts are bullish on the stock, giving Foot Locker a consensus rating of ‘buy’ with an average target price of $60.71.

In contrast to Foot Locker’s bold growth, Campbell Soup Co looks like it has been left on the shelf ahead of its Q3 2015 earnings release on Friday, even if its stock price is still high. Steady if unspectacular growth saw the cupboard staple company go from $43.21 at the start of 2014 to $44.12 the following New Year, reaching a high of $46.67 in the interim. Since the start of 2015 has seen a similarly positive, if similarly steady, trend, with Campbell reaching a high of $47.95 at the start of February. This quickly gave way to a contraction with the company receding to a $45 to $47 trading bracket; Campbell is currently priced at $46.72.


(Source: IT-Finance.com 21/05/2015)

Frustratingly for Campbell Soup, it was recently announced as one of the brands, alongside companies like Kraft and Kellogg, that mega-store Target would no longer be pushing in its attempted switch to fresher products and attract the elusive millennial market. Since Campbell’s is associated with family, and a family from a certain age at that, it comes as no surprise that a) the company’s core customer base is aging and similarly, b) it is struggling to attract a different, i.e. younger, kind of customer. Canned produce in general has become unfashionable and a sign of unhealthy food, regardless of the produce going into the can, shown in Target’s shift away from companies like Campbell Soup. It is a cultural change that Campbell’s will have to combat head on to maintain its growth.

In terms of the company’s actual results, after explosive revenue growth in its past 3 quarters, up 44% in Q4, 4% in Q1 and 13% in Q2, Campbell is forecast to saw a 2% decline year-on-year from $1.97 billion to $1.93 billion. This revenue decline comes alongside an 18% fall in earnings per share to $0.51 from $0.62. Whilst its stock price is still robust, its latest figures look set to underwhelm, leading analysts to give Campbell Soup a consensus rating of ‘hold’ with an average price target of $43.14.