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Campbell Soup Co CPB

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Sales and Profits Simmer for Campbell in Q4, but Headwinds Loom; Shares Fairly Valued

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Going into wide-moat Campbell’s fourth-quarter print, we think investors were primarily focused on whether the recent acceleration in top-line performance (prompted by COVID-19-related pantry stocking, as 95% of its sales stem from the retail channel) would persist after jumping 17% in its third fiscal quarter. Although it put up banner fourth-quarter marks (12% organic sales growth, 190 basis points of adjusted gross margin gains to 35.6%), shares faltered at a mid-single-digit clip on the results. However, we don’t posit this retreat was in response to its performance; rather, we attribute this modest pullback to management’s reluctance to offer a forward-year forecast (given the inherent uncertainty resulting from the pandemic) and a more tempered outlook for the first quarter (5%-7% organic sales growth and 6%-9% growth in adjusted operating income).

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Company Profile

Business Description

With a history that dates back around 150 years, Campbell Soup is now a leading manufacturer and marketer of branded convenience food products, most notably soup. The firm's product assortment includes well-known brands like Campbell's, Pace, Prego, Swanson, V8, and Pepperidge Farm. Following the sale of its international snacking operations, the firm is poised to derive nearly all of its sales from its home turf. Campbell has made a handful of acquisitions to reshape its product mix the past few years, including the tie-up with Snyder's-Lance (completed in March 2018), which stands to enhance its exposure to the faster-growing on-trend snack food aisle, complementing its Pepperidge Farm lineup.

Contact
1 Campbell Place
Camden, NJ, 08103-1799
T +1 856 342-4800
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jul 31, 2020
Fiscal Year End Aug 2, 2021
Stock Type High Yield
Employees 14,500

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