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Argus Has Downgraded Campbell Soup Company to a ‘Hold’

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Sep. 20 2016, Updated 4:04 p.m. ET

Price movements

Campbell Soup Company (CPB) has a market cap of $17.2 billion. It fell 0.13% to close at $55.31 per share on September 19, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.2%, -9.1%, and 6.9%, respectively, on the same day.

CPB is trading 5.2% below its 20-day moving average, 9.6% below its 50-day moving average, and 7.6% below its 200-day moving average.

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Related ETF and peers

The PowerShares Dynamic Market ETF (PWC) invests 0.49% of its holdings in Campbell Soup. The ETF tracks a quantity-selected, tier-weighted index covering the entire US equity market. The YTD price movement of PWC was 2.1% on September 19.

The market caps of Campbell Soup’s competitors are as follows:

  • Mondelez International (MDLZ) — $66.9 billion
  • General Mills (GIS) — $39.3 billion
  • Kraft Heinz Company (KHC) — $106.2 billion

CPB’s rating

Argus has downgraded Campbell Soup Company’s rating to a “hold” from a “buy.”

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Performance of Campbell Soup in fiscal 4Q16

Campbell Soup reported fiscal 4Q16 total sales of $1.68 billion, a fall of 0.35% compared to its total sales of $1.69 million in fiscal 4Q15. Sales from its Global Biscuits & Snacks segment rose 0.81%, and sales from its Campbell Fresh segment fell 4.7% in fiscal 4Q16 over fiscal 4Q15.

Its net income and EPS (earnings per share) fell to -$81.0 million and -$0.26, respectively, in fiscal 4Q16, compared to $17.0 million and $0.05, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.46 in fiscal 4Q16, a fall of 6.1% over fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, CPB reported net sales of $8 billion, a fall of 1.2% YoY (year-over-year). The company’s EBIT (earnings before interest and tax) fell 8.9% in fiscal 2016.

Its net income and EPS fell to $563 million and $1.81, respectively, in fiscal 2016, compared to $666 million and $2.13, respectively, in fiscal 2015. It reported adjusted EPS of $2.94 in fiscal 2016, a rise of 10.9% YoY.

Campbell Soup’s cash and cash equivalents rose 17.0% in fiscal 2016. Its current ratio and debt-to-equity ratio fell to 0.70x and 2.3x, respectively, in fiscal 2016, compared to 0.75x and 3.0x, respectively, in fiscal 2015.

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Campbell Soup’s dividend

Campbell Soup has declared a quarterly dividend of $0.35 per share on its common stock, which represents a rise of 12%. The dividend will be paid on October 31, 2016, to shareholders of record at the close of business on October 12, 2016.

Projections

The company has the following projections for fiscal 2017:

  • organic sales growth: 0%–1%
  • adjusted EBIT growth: 1%–4%
  • adjusted EPS growth: 2%–5%, or $3.00–$3.09 per share

In the next article, we’ll discuss Coach (COH).

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