Campbell Soup (CPB
34.62, -4.59, -11.70%) is down, as the company's earnings guidance
cut overshadows better than expected earnings. The staple stock has struggled
ever since peaking in the $68 area in mid-2016. Shares bounced from $54 to $63
in January 2017, but that rally fizzled and has been followed by aggressive
selling over the past 16 months. Today's pre-market drop has pressured the
stock to levels not seen since the start of 2013.
Besides reporting earnings, the company announced that CEO Denise Morrison retired, effective immediately. Keith McLoughlin, who has been a board member since 2016, has been named interim CEO. Chief Operating Officer Luca Mignini will oversee the integration of Snyder's-Lance and Pacific Foods. In addition, Mr. Mignini is in charge of stabilizing the company's soup business.
The company reported above-consensus third quarter earnings of $0.70 per share on a 14.7% year/year increase in revenue to $2.13 bln, which matched market expectations. However, the company lowered its guidance for the fiscal year to account for the impact of the Snyder's-Lance acquisition. Campbell expects that earnings for the full year will be down between 5.0% and 6.0% after previous guidance called for a decline between 1.0% and 3.0%. Revenue for the fiscal year is expected to show growth between 10.0% and 12.0%, up from previous guidance that called for a year/year revenue uptick of just 0.1%.
Campbell's revenue growth rate was almost entirely due to the acquisition of Snyder's-Lance and Pacific Foods. The acquisitions boosted the growth rate by 14 percentage points while favorable currency translations added another percentage point to the growth rate. Organic sales were little changed as gains in Global Biscuits, Snacks, and Campbell Fresh were offset by declines in Americas Simple Meals and Beverages.
Adjusted gross margin declined to 32.0% from 35.9%. Cost inflation, higher supply chain costs, and higher promotional spending were partly offset by productivity improvements and benefits from cost saving initiatives. Adjusted marketing expenses grew 8.0% while adjusted administrative expenses decreased 6.0%.
Looking at the segment breakdown, sales in the Americas Simple Means and Beverages unit grew 5.0% to $1.01 bln, entirely due to the acquisition of Pacific Foods. Organic sales fell 2.0% due to declines in V8 beverages, Plum products, and U.S. soup. Segment operating earnings decreased 3.0% to $217 mln.
Global Biscuits and Snacks revenue grew 35.0% to $862 mln. Organic sales increased 1.0% while segment operating earnings grew 23.0% to $123 mln. The growth was due to the Snyder's-Lance acquisition.
Campbell Fresh revenue increased 1.0% to $251 mln, mostly due to gains in refrigerated soup. Bolthouse Farms sales were little changed. Segment operating loss totaled $19 mln due to higher supply chain costs and cost inflation.
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