Why Campbell Soup Stock Rose after Its Q4 Results

  • Campbell Soup beats its fourth-quarter estimates.
  • The stock rose due to the company’s better-than-expected results and growth guidance.

Campbell Soup (CPB) stock rose about 3.9% in the pre-market session on Friday. The company posted better-than-expected fiscal fourth-quarter results. Campbell Soup’s combined sales of $2.0 billion beat analysts’ expectation and increased about 2% YoY (year-over-year). The net sales from continued operations also rose 2% to $1.8 billion. The company’s organic sales rose 2% during the fourth quarter.

Notably, the company agreed to sell Arnott’s and some of its International operations. The businesses are part of the company’s discontinued operations.

Campbell Soup’s combined adjusted EPS was $0.50, which beat analysts’ estimates by a wide margin. Analysts expected Campbell Soup to post an EPS of $0.41. The adjusted EPS has risen 14% YoY.

Notably, most food companies had impressive performances in the recent quarter. Kellogg (K), Hershey (HSY), and Mondelēz (MDLZ) reported improved organic sales and beat analysts’ estimates.

Kellogg had an impressive financial performance due to an improvement in its underlying sales. The company’s organic sales rose 2.3%. Higher pricing and growth in Pringles supported the company’s sales growth during the last reported quarter. Meanwhile, Mondelēz’s organic sales rose 4.6% due to healthy growth in its pricing and volumes. Hershey’s organic sales also gained from higher pricing and volumes. The company’s bottom line crushed analysts’ expectations by a wide margin.

While most of the results were impressive, J.M. Smucker (SJM) had a disappointing quarterly performance. The company’s first-quarter sales and profitability fell short of analysts’ expectations. The company’s management lowered the fiscal outlook, which irked investors.

Will Campbell Soup rise more?

Campbell Soup expects to sustain its sales and earnings momentum in fiscal 2020. The company expects net sales from continuing operations to increase 1%–3% in fiscal 2020. The adjusted EPS will likely be $2.50–$2.55—up 9%–11% YoY.

We expect Campbell Soup stock to benefit from its lean structure and cost-saving initiatives. Divesting underperforming businesses will help the company focus on its core business. Moreover, divesting the businesses will help reduce Campbell Soup’s debt.

So far, Campbell Soup stock has risen 31.3% YTD (year-to-date) as of Thursday. We expect improved organic sales, cost-saving initiatives, and debt reduction to support the company’s bottom-line growth and its stock.