Earnings preview: Campbell Soup sheds some more weight in Q4

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Campbell Soup Company (NYSE: CPB) is slated to report fourth quarter 2019 earnings results on Friday, August 30, before the opening bell. Earnings are estimated to increase 64% year-over-year to $0.41 per share while revenues are projected to drop 9% to $2 billion.

The topline numbers are expected to be pulled down by the ongoing weakness in the soups business. The quarterly results are also likely to be pressured by the divestiture of the Campbell Fresh business as well as by high input costs of aluminum, steel cans and vegetables.

The company’s snacks business continues to deliver solid
performance and this can help drive growth in the fourth quarter. The
acquisitions made by Campbell are also likely to contribute to the momentum by
strengthening the product portfolio.

Campbell has been taking several measures to streamline its operations
and focus more on its core business in North America. After the divestiture of
Campbell Fresh, the company announced the sale of its Campbell International
division for an aggregate price of $2.5 billion.

In July, Campbell signed an agreement to sell its Denmark-based snacks business, Kelsen Group, to a Ferrero-affiliated company for $300 million. Earlier this month, the company announced the sale of Arnott’s and certain of Campbell’s International operations to investment firm KKR (NYSE: KKR) for $2.2 billion. The proceeds from these divestitures will be used to reduce debt.

Also see: Campbell Soup Q3 2019 Earnings Call Transcript

These measures, along with the company’s cost-saving efforts,
are likely to help drive growth. Campbell’s cost savings program is progressing
well with the company reporting total program-to-date savings of $605 million last
quarter.

In the third quarter of 2019, Campbell topped revenue and earnings estimates. Sales grew 12% to $2.38 billion while adjusted EPS fell 20% to $0.56.

For fiscal-year 2019, Campbell expects net sales to come in the range of $9.07 billion to $9.12 billion and adjusted EPS to be $2.50-2.55.

Campbell’s shares have gained 25% year-to-date and over 11% in the past three months. The stock has an average price target of $39.50.

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