Thursday, May 19, 2011

Campbell Soup Co. (NYSE: CPB): Q3 Earnings Preview 2011

Campbell Soup Co. (NYSE: CPB), the world's largest soup company, is scheduled to release its fiscal third-quarter earnings before the opening bell on Monday, May 23, 2011. Analysts, on average, expect the company to report earnings of 52 cents per share on revenue of $1.80 billion. In the year ago period, the company reported earnings of 54 cents per share on revenue of $1.80 billion.

Campbell Soup Company, together with its subsidiaries, engages in the manufacture and marketing of branded convenience food products worldwide. The Company operates in four segments: U.S. Soup, Sauces and Beverages; Baking and Snacking; International Soup, Sauces and Beverages, and North America Foodservice. 

In the preceding fiscal-second quarter, the Camden, New Jersey-based company's net income was $239 million, or 71 cents per share, compared with $259 million, or 74 cents per share, in the year-ago quarter. Revenue slipped 1% to $2.13 billion from $2.15 billion. Analysts, on average, expected the company to report earnings of 83 cents per share on revenue of $2.20 billion. 

At its last earnings call in February, the company trimmed its fiscal 2011 outlook. Campbell said that it now expects fiscal 2011 earnings per share to decline 1 percent to 3 percent. Net sales are currently projected to be up 1 percent to down 1 percent for the period. Previously, the company had estimated earnings per share growth of 2 percent to 4 percent, and net sales growth of 1 percent to 3 percent for fiscal 2011.

According to the company, competitive pressure in the U.S. Soup, Sauces and Beverages segment is likely to prevail in the second half of the year. Therefore, growth in the second half of the year will be at more modest rates than previously anticipated and will come largely in the fourth quarter.

The processed and packaged goods sector is currently struggling through a balancing act between price-hikes and ceding market share to store-brands. As commodity prices surge, food makers are forced to either watch their margins shrink or attempt to pass the prices on to their consumers.

Sales at Campbell have declined in eight of the last 10 quarters as the company, which also makes Pepperidge Farm foods, V8 beverages and Prego sauces, struggled with intensified competition from rivals such as General Mills Inc. and lower-priced store brands. 

Food industry experts believe soup has been losing out to other meals that are just as simple to prepare, such as macaroni and cheese and frozen pizza. In November, company executives told investors they expect to see pressure on Campbell's profit margins from continued discounting in the fiscal second quarter. To counter that, the company said it would shift more resources to advertising from promotions.

The company lowered prices to stay competitive last year, but that didn't really help sales volume. Campbell is now going to move away from discounting in favor of more innovation and advertising. The company will debut "Slow Kettle" soups in late summer, he told the Journal. They are minimally processed with five flavors such as Southwest-style chicken chili that may interest younger buyers -- a weak point for the company.

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