Shares of Campbell Soup Company CPB have gained roughly 16% year to date, clearly outperforming the Zacks categorized Food-Miscellaneous/Diversified industry’s growth of 8.3%. The outperformance is attributed to the company’s solid quarterly performance, strategic actions and cost saving initiatives. Let’s delve deeper to find more about the stock.
Growth Drivers
The company’s strategic endeavors revolve around enhancing its brand portfolio while accelerating future growth. In this regard, the company has been undertaking acquisitions and joint ventures like the acquisition of leading refrigerated salsa maker, Garden Fresh Gourmet in fiscal 2015. Prior to this, the company acquired three growth engines in fiscal 2014, including the CPG portion of Bolthouse Farms, Plum Organics and the Kelsen Group, which provide for combined annual sales of nearly $1 billion.
Further, its entry into joint ventures with Grupo Jumex and Conservas La Costena in Mexico enhanced its manufacturing and distribution capabilities in addition to expanding its presence in the global market.
Additionally, the company’s focus on achieving profitable and sustainable growth is evident from its recently drawn four-point strategy. These strategies aim at raising the level of transparency about the food that it produces and the ingredients used; portfolio diversification; shift toward advertising via mobile and digital devices and strengthening the presence of its snacks brands across geographies, particularly in Asia.
Not only this, Campbell is well on track with its cost-saving initiatives. Its strategy of concentrating on supply chain efficiencies, along with curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. Notably, the company generated additional savings of $35 million in the first quarter and is on track to achieve cost savings of $300 million by the end of fiscal 2018.
Coming to earnings, Campbell posted better-than-expected adjusted earnings for first-quarter fiscal 2017, while sales were in line with estimates. Also, Campbell witnessed gross margin expansion of 120 basis points, backed by cost-saving efforts and supply chain efficiencies, thus reverting to its gross margin expansion trend.
Based on the solid fiscal first quarter results, the company reiterated its sales and earnings forecasts for fiscal 2017. Going forward, Campbell remains committed toward augmenting top-line growth and managing costs efficiently.
Consequently, the Zacks Consensus Estimate has increased 3 cents to $3.09 for fiscal 2017 and 5 cents to $3.25 for fiscal 2018.