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Campbell Soup Earnings Are Good Food for Investors

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Now serving much more than just soup, shares of multi-brand food conglomerate Campbell Soup Co. are trading 10% higher today as the firm announced better than expected annual earnings.

Shares of Campbell Soup Company (CPB:NYSE) are trading more than 10% higher today as the company announced fourth-quarter and full-year results for fiscal 2019.

The firm reported that in Q4/19 sales increased 2% to $1.78 billion compared to $1.745 billion in Q4/18, driven by gains in snacks, as well as meals & beverages. Gross margin increased from 31.4% to 34.0% in the same period. The increase in adjusted gross margin was driven primarily by supply chain productivity improvements, the benefits from cost savings initiatives and the favorable impact from lapping costs associated with the July 2018 voluntary recall of Flavor Blasted Goldfish crackers, partly offset by cost inflation.

Campbell's reported Q4/19 earnings before interest and taxes (EBIT) was $83 million. Excluding items impacting comparability, adjusted EBIT increased 1% to $252 million as sales gains and gross margin improvement were partly offset by higher marketing and selling expenses. The company reported a loss from continuing operations of $0.02 per share. The firm noted that excluding items impacting comparability, adjusted EPS from continuing operations in Q4/19 increased 14% to $0.42 per share primarily due to a lower adjusted tax rate.

For full-year FY/19 sales increased 23% to $8.1 billion, up from $6.6 billion in FY/18, reflecting the benefit from the acquisitions of Snyder's-Lance and Pacific Foods. Organic sales were comparable to the prior year.

The company reported EPS from continuing operations of $1.57 per share. Excluding items impacting comparability, adjusted EPS from continuing operations decreased 8% to $2.30 per share reflecting higher adjusted net interest expense, partly offset by a lower adjusted tax rate.

Mark Clouse, Campbell's president and CEO, stated, "Our strong Q4/19 results culminated a year of steady, positive performance for Campbell. We delivered consistent results and met or exceeded expectations for four consecutive quarters this year. We made significant progress against our FY/19 strategic initiatives, namely: improving our in-market performance; overdelivering our cost savings programs; strengthening our relationships with key retailers; focusing the portfolio on our two core businesses in North America; and, completing the divestiture of Campbell Fresh and announcing the divestiture of Campbell International. We have created a solid foundation to build upon in FY/20."

The company provided guidance for FY/20 indicating that it expects net sales to grow by 13%, adjusted EBIT to grow by 24% and adjusted EPS to grow by 911%. FY/20 comprises 53 weeks, one additional week compared to FY/19. The benefit of the 53rd week is included in the FY/20 guidance and is estimated to be worth two (percentage) points of net sales, adjusted EBIT and adjusted EPS. Expected net proceeds of approximately $3 billion from the divestitures of Campbell Fresh and Campbell International are being used to reduce debt. The guidance takes into account the impact of the paydown on the company's interest expense in FY/20.

Campbell Soup Co. was founded in 1869 and states that it is driven and inspired by its purpose, "Real food that matters for life's moments." The firm has a market cap of over $13 billion and has expanded well beyond its traditional soup business. Its Meals & Beverages segment includes the retail and food service businesses in the U.S. and Canada, including the following products: Campbell's condensed and ready-to-serve soups; Swanson broth and stocks; Pacific Foods broth, soups, non-dairy beverages and other simple meals; Prego pasta sauces; Pace Mexican sauces; Campbell's gravies, pasta, beans and dinner sauces; Swanson canned poultry; Plum baby food and snacks; V8 juices and beverages; and Campbell's tomato juice. The Snacks segment consists of Campbell's snacking portfolio in U.S. retail, which includes the following products: Pepperidge Farm cookies including Milano and Farmhouse; Goldfish crackers; Pepperidge Farm fresh bakery and frozen products; Snyder's of Hanover pretzels; Lance sandwich crackers; Cape Cod and Kettle Brand potato chips; Late July snacks; Snack Factory Pretzel Crisps; Pop Secret popcorn; Emerald nuts; and, other snacking products.

CPB shares opened higher today at $44.92 (+$1.67, +3.86%) over the previous day's close of $43.31. In morning trading, the stock set a 52-week high price of $48.03 with shares trading between $44.75-48.03. At present, the stock is priced at $46.65 (+$3.34, +7.71%).

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