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Why Campbell Soup’s Sales Growth Is Projected to Decelerate

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Recent performance

Campbell Soup (CPB) has posted stellar sales growth in the past four quarters. The company’s top line has increased at a double-digit rate in the past four quarters thanks to incremental sales from Pacific Foods and Snyder’s-Lance. During the last reported quarter, Campbell Soup’s top line grew 24.4% on a YoY basis, reflecting a 26% contribution from its recent acquisitions.

Packaged food manufacturers in the US have managed to accelerate their top-line growth rate through the acquisition of fast-growing brands. General Mills (GIS), J.M. Smucker (SJM), Conagra Brands (CAG), Kellogg (K), and Hershey (HSY) reported higher sales driven by acquisition.

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Outlook     

Campbell Soup’s top line growth rate remains strong. However, we aren’t impressed, as its base business remains weak. Heightened competition and promotional spending to push demand continue to hurt organic sales. Other major packaged food companies have also disappointed with their organic sales performance as a result of the shifting demand from packaged foods to healthy alternatives, lower pricing, and increased competition.

We expect Campbell Soup’s sales growth rate to decelerate significantly in the coming quarters as the company annualizes its recent acquisitions and faces tough comparisons. Analysts expect Campbell Soup’s top line to increase by approximately 12% in the third quarter. Meanwhile, its fourth-quarter sales are projected to decline by about 2%.

As for fiscal 2020, analysts expect Campbell Soup’s top line to stay flat owing to the tough comparisons and weakness in the base business.

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