Campbell Soup's Earnings Beat

But the company sees some margin pressure and guides its fourth quarter down.
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Campbell Soup's

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third-quarter earnings were modestly above last year's, as higher ad spending and negative volume and product-mix trends offset the positive effects of currency translation.

The food company earned $142 million, or 34 cents a share, in the quarter ended May 2, up from $129 million, or 31 cents a share, last year. The latest quarter included a litigation-related gain of $10 million, before which Campbell earned 32 cents a share. Sales in the latest quarter rose 4% to $1.7 billion.

Analysts surveyed by Thomson First Call were forecasting earnings of 32 cents a share on sales of $1.64 billion in the latest quarter. The company also forecast fourth-quarter earnings of 17 cents a share, compared with the First Call consensus of 19 cents a share, bringing full-year 2004 earnings before the litigation gain to $1.58 a share, matching estimates.

Of the 4% sales increase in the latest quarter, favorable currency translation was responsible for 5 positive percentage points, while higher prices added another point. Volume and mix subtracted 1 point as did higher promotional spending.

"Our earnings in the quarter were in line with our projections, but we must address the decline in our operating margins," Campbell said in a release. "We knew this quarter would be a difficult sales comparison for U.S. Soup because we were lapping an extremely strong third quarter last year and we are following a strong second quarter this year. In addition, we continued our heavy investment in promotional activity to be fully competitive in this category."