Why Campbell Soup (CPB) Is Up Today

NEW YORK (TheStreet) -- Campbell Soup (CPB) was gaining 4.9% to $42.97 Friday after the soup producer announced second-quarter earnings that beat analyst estimates.

For its fiscal second quarter Campbell Soup posted earnings of 76 cents a share, beating analyst estimates of 71 cents a share by 5 cents. Revenue rose 5.5% to $2.28 billion for the quarter. Analysts surveyed by Thomson Reuters expected revenue of $2.28 billion.

The company said that soup sales were up 5% in the quarter. Sales of its Simple Meals unit, which includes soup, rose 7% to $894 million in the quarter.

Campbell Soup expects earnings between$2.53 and $2.58 a share in 2014, compared to analyst estimates of $2.51 a share.

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TheStreet Ratings team rates CAMPBELL SOUP CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAMPBELL SOUP CO (CPB) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 40.14% is the gross profit margin for CAMPBELL SOUP CO which we consider to be strong. Regardless of CPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.94% trails the industry average.
  • CAMPBELL SOUP CO's earnings per share declined by 21.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CAMPBELL SOUP CO reported lower earnings of $2.17 versus $2.41 in the prior year. This year, the market expects an improvement in earnings ($2.51 versus $2.17).
  • CPB, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, CAMPBELL SOUP CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CPB Ratings Report

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