GO
Loading...

Enter multiple symbols separated by commas

Campbell Soup Beats Profit Estimates, Stock Soars to 7-Year High

Campbell Soup posted better-than-expected quarterly profit this morning, sending its shares to a seven-year high, as sales of Pepperidge Farm baked goods offset U.S. soup sales that fell amid unseasonably warm weather during much of the quarter.

The company also raised its full year profit forecast.

U.S. Treasury Secretary Timothy Geithner
Getty Images
U.S. Treasury Secretary Timothy Geithner

Campbell said profits rose to $285 million, or 72 cents a share, in the fiscal second quarter ended Jan. 28, from $254 million, or 61 cents a share, a year earlier.

Excluding the gain on the sale of a Pepperidge Farm facility, earnings were 68 cents a share. Analysts, on average, forecast earnings of 63 cents a share, according to Thomson Financial.

Gross margins rose to 42.9% from 42.1%, as pricing and productivity gain exceeded cost increases, the company said.

But the company also reduced advertising and promotion spending, which could raise concern with analysts. A spokesman said the reduction was planned going into the quarter.

"I think some of the strength in operating profit is linked to lower marketing and advertising, so the quality of earnings is not that great," Arun Daniel, senior sector analyst, consumer discretionary and staples, at ING Investment Management, said. "But I think the fact that they raised the '07 outlook is positive." ING Investment Management owns about 800,000 Campbell shares.

Like many food companies, Campbell has raised prices to try to overcome rising costs, while also spending money to develop new products like low-sodium soups.

Sales rose 4.2 percent to $2.25 billion, though U.S. soup sales fell 1%. The second quarter is typically the largest sales quarter for the company as colder weather spurs soup consumption.

The company said retailers built up less soup inventory in the quarter than a year ago, likely due to the warmer weather. A spokesman said the company expects a correction in the third quarter, with retailers reducing inventory less than they did a year ago.

Sales in the baking and snacks business, which includes Pepperidge Farm, rose 6 percent, the company said.

Campbell said it now expects earnings from continuing operations to rise 10 percent to 12 percent in fiscal year 2007 from adjusted pro forma results of $1.73 in 2006. That is an increase from the company's forecast of a 5% to 7% increase.

Before Friday. Campbell shares traded at about 19 times estimated 2008 earnings, compared with a multiple of 16.9 for Progresso soup maker General Mills.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

  • Mark Cuban and Donald Trump

    Donald Trump appears to have Mark Cuban's vote, at least in terms of how the billionaire real estate mogul is conducting his political campaign.

  • Ferrari 488 Spider

    Ferrari's new 488 Spider will have a V-8 turbo engine and a retractable hard-top roof that lowers in just 14 seconds.

  • Members of the New Horizons science team react to seeing the spacecraft's last and sharpest image of Pluto before closest approach later in the day at the Johns Hopkins University Applied Physics Laboratory (APL) in Laurel, Maryland July 14, 2015.More than nine years after its launch, a U.S. spacecraft sailed past Pluto on Tuesday, capping a 3 billion mile (4.88 billion km) journey to the solar system's farthest reaches, NASA said.

    The New Horizons Pluto flyby mission set records for NASA's social media and web metrics——but why do we care so much?

U.S. Video