Campbell Soup (CPB 40.62, +2.17, +5.64%) jumped 4.0% in pre-market trading after the company posted quarterly results that beat expectations.
The legacy food company reported above-consensus first quarter earnings of $0.79/share on a 24.7% year/year spike in revenue to $2.69 bln, which was also ahead of expectations.
Going forward, Campbell Soup expects that earnings for fiscal 2019 will be between $2.45/share and $2.53/share while revenue is expected between $9.98 bln and $10.10 bln. Both guidance ranges are ahead of market expectations. The company noted that it sees fiscal 2019 as a transition year, during which Campbell will implement its plans for improving future performance.
Campbell Soup interim President and CEO Keith McLoughlin said the company's management has been encouraged by progress made towards the company's goal of simplifying, focusing, and optimizing its product portfolio. The company is working to emphasize its Snacks and Meals/Beverages businesses in its core North American market.
Returning to first quarter results, the company's revenue growth rate was fueled entirely by a benefit from recent acquisitions of Snyder's-Lance and Pacific Foods. On an organic basis, sales declined 3% due to higher promotional spending, a change in revenue recognition standards, and lower volume.
Adjusted gross margin weakened to 31.6% from 36.5% one year ago. Recent acquisitions weighed on gross margin while cost inflation, higher supply chain costs, and higher promotional spending also contributed to the decline. Growth in supply chain costs was mostly due to costs associated with the start-up of a distribution facility in Ohio.
Looking at the segment breakdown, in the Meals and Beverages segment, sales ticked up 0.4% to $1.24 bln while organic sales declined 5% due to lower sales of soup and Prego pasta sauces in the U.S. and lower sales in Canada. The declines were partially offset by higher sales of beverages. Excluding the acquisition of Pacific Foods, sales of soup in the U.S. declined 6%. The company attributed the decline to continued competitive pressure and increased promotional spending. Segment operating earnings declined 11% to $294 mln.
Global Biscuits and Snacks revenue grew 77% to $1.22 bln. On an organic basis, sales declined 1% due to lower sales of Kelsen cookies. Segment operating earnings grew 32% to $154 mln, which was entirely due to the acquisition of Snyder's-Lance.
Campbell Fresh revenue declined 0.9% to $232 mln due to lower sales of refrigerated soup, Garden Fresh Gourmet products, and Bolthouse Farms refrigerated beverages. Segment operating improved to $3 mln from a loss of $6 mln one year ago. Operational improvements were responsible for the smaller loss.
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