The New and Improved Campbell Soup Co.: Opinion

NEW YORK (TheStreet) -- You'd think there would be nothing more boring than a 143-year old company that makes most of its money selling canned soups.

Think again, and meet CampbellSoup ( CPB) and its sterling CEO, Denise Morrison, who for the past 12 months has infused the company with new life and achievable goals.

Campbell Soup has been having a banner year, and so has the price of its stock, as you can see from the following chart: CPB Chart CPB data by YCharts

Although the shares recently hit a 52-week high of $35.60, due in large part to a dramatic increase in revenue per share, CPB still is nearly 12% below the $40 price reached in 2008 before the financial world imploded.

On average, analysts expect the company to report a profit of 39 cents a share on revenue of $1.59 billion for its fiscal 2012 fourth quarter, which ended July 31. That would mark a more than 25% EPS increase from the 2011 fiscal fourth quarter, when Campbell reported earnings of 31 cents a share. Revenue was $1.61 billion in that quarter.

Campbell traditionally gets more than half of its revenue from its soup unit, which includes the company's co-branded Kirkland Signature and Stockpot soups that it sells at COSTCO ( COST) stores.

The Camden, N.J.-based company also makes V8 juice, Prego spaghetti sauce, Pace Mexican food sauces and Pepperidge Farm baked goods.

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Campbell's has seen its soup business decline in recent years. When she took the reins as CEO, Denise Morrison vowed to improve the soup business. The company has been introducing a number of new products including new flavors of its Chunky soups to improve sales. But in the previous quarter, the company was disappointed to admit that sales of U.S. soups fell 3% from a year ago.

According to a recent Associated Press report, there's a bigger picture that shareholders and potential investors should focus on.

"Campbell plans to introduce new products this fiscal year targeted at younger consumers between the age of 18 and 34, which it refers to as 'Millennials'. But even as it looks to fix its soup business, Campbell is moving to expand into faster-growing areas.

"Last month, the company said it would buy premium juice maker Bolthouse Farms for $1.55 billion cash, as a way to move into the fresh, packaged food category. Campbell expects the $12 billion market for packaged fresh foods to grow about 6 percent to 7 percent per year, outpacing the broader packaged-food category."

But the real secret weapon that Campbell has is its optimistic and energetic CEO.

Morrison recently discussed how the company is working to achieve its growth goals in an article titled "Soup-er Woman -- Spelling out Campbell's Success Strategy" in Costco's membership magazine:

"The way we are doing that is focusing on brand building," she was quoted saying. "Second is delivering more meaningful innovation, and not just the next line extension, but new-to-the-world innovation."

Morrison gave more insight in what she was talking about: "For example, the pouch soups that we are going to be introducing and our expansion into the energy segment beverages. The third strategy is to grow faster with our customers and make sure that we are collaborating with our customers to deliver their objectives with our products."

That's the type of intuitive, forward-thinking leadership that can turn a stodgy business into a thriving one. She even has a fourth strategy and objective: "Fourth is to leverage external development which they've been doing already, and not only acquisitions but also partnerships and strategic alliances."

Many analysts, including me, agree that these are the strategies that will propel Campbell's revenues and future earnings growth. With a price-to-earnings-to-growth ratio (5-year expected) of 3.55, the share price level appears to be greatly extended, so future growth rates need to accelerate.

The company pays a 3.3% dividend yield based on its most recent share price of $35.14. That translates to a high payout ratio of 50%. So unless the company really delivers sustained earnings and revenue growth, it will be very challenging for it to continue its tradition of ever-increasing dividends.

In her concluding remarks in the Costco magazine interview, Morrison said, "Just like I set goals in my personal life and career, I also set goals for the company and with this leadership team. Success to me is delivering them. We are in a tough climate right now, but we have our goals and we're very focused on them. I won't rest or be satisfied until we deliver them."

With Campbell's strong foundation and Morrison's strong ambition, I'm convinced the company will achieve its CEOs goals and that shareholders will smiling every step of the way.

That doesn't mean I won't wait for a correction to buy shares, however.

The 200-day moving average and the lower Bollinger Band suggest a good entry target price at a little less than $33. Considering that CPB shares traded as low as $32.24 on Aug. 2, 2012, patience may pay off nicely for those who want a better price and thus a higher yield-to-price.

It'll be exciting to hear the details about the company's fiscal fourth-quarter results and the conference call that is scheduled to follow.

No matter what the current numbers reveal, though, it's easy to be convinced that with Ms. Morrison in charge, CPB is headed in the right direction and will reach its healthy goals.

At the time of publication the author is neither long nor short any of the companies mentioned in this article.

At Action Alerts PLUS Jim Cramer and Stephanie Link actively manage a real money portfolio for Jim's charitable trust. Enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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