Campbell Soup Company (CPB – Free Report) released first-quarter fiscal 2019 results, wherein both top and bottom lines came ahead of the Zacks Consensus Estimate. Also, management reiterated its outlook. However, earnings plunged year over year and organic sales also remained soft, owing to intense promotions and lower volumes.
We note that this Zacks Rank #4 (Sell) stock has lost nearly 17% this year, wider than the industry’s decline of close to 9%.
Q1 Highlights
Adjusted earnings of 79 cents per share slumped 14% year over year, though it beat the Zacks Consensus Estimate of 69 cents. The downside was led by a fall in adjusted EBIT on base business, somewhat cushioned by reduced adjusted tax rate. Adjusted tax rate fell 3.9 percentage points to 24.3%.
Net sales of $2,694 million surged 25% year over year, backed by gains from buyouts of Snyder’s-Lance and Pacific Foods. Organic sales dropped 3% mainly due to reduced volumes and increased promotions. Nonetheless, net sales came ahead of the Zacks Consensus Estimate of $2,677 million.
Campbell Soup Company Price, Consensus and EPS Surprise
Campbell Soup Company Price, Consensus and EPS Surprise | Campbell Soup Company Quote
Moving on, the company’s adjusted gross margin contracted 4.9 percentage points to 31.6%, which included a negative impact of about 190 basis points from the recent buyouts. Apart from this, the gross margin contraction was accountable to cost inflation, escalated supply-chain expenses and increased promotional spending. This was somewhat compensated by productivity improvements and gains from cost savings.
Adjusted EBIT dropped 2% to $410 million, driven by alterations in revenue recognition. Also, adjusted EBIT was hurt by softness in the base business, partly made up by gains from recent buyouts.
Segment Analysis
Campbell reports results under three segments, namely Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh. The Latin America business is managed as part of the Global Biscuits and Snacks segment starting from fiscal 2018. Earlier, this division formed part of the Americas Simple Meals and Beverages segment.
