Campbell Soup (NYSE: CPB) served up a tasty broth of estimate-beating soup this past Friday. According to Trey Thoelcke's earnings preview, the market was looking for $0.42 per share and $1.8 billion in net sales. Well, according to Jon Ogg's coverage, Campbell delivered $0.48 per share and roughly $1.7 billion in net sales. So, revenues came in somewhat soft, but the bottom line was a success as far as Wall Street was concerned.
One thing Campbell investors want to look at is the gross margin. This metric tells you how the company is doing in terms of cost control. The press release stated that gross margin went up to an adjusted 40.3%. Last year at this time, management reported a gross margin of 38.6%. Pricing helped out, as well as efficiency initiatives. It's cool to see that Campbell can leverage price actions to propel its gross margin. It shows the power of its brand equity.
Now, the last time I discussed Campbell, I think it was possible to detect a bearish tone in my commentary. Well, I'm not sure I'm totally bullish at the moment, but I do have to admit that Campbell does seem to be holding up okay. No, you haven't made a lot of money on the stock in the short term, and there are headwinds out there to be sure. Take currency translations, for example. That issue has been affecting the results of all global businesses.
But I still believe Campbell is fine for a long-term portfolio. It's trading at a decent dividend yield right now. Thing is, I'm not sure I'd call Campbell a solid buy at the moment. We've had a lot of bullish sentiment in the markets, but I'm wondering if that's going to start to wane. Connie Madon recently talked about this.
Campbell could go lower in the short term (I hope you didn't buy shares of the company on Friday when they were in the green). And all brand-based food companies like Kraft Foods (NYSE: KFT), General Mills (NYSE: GIS), and Kellogg (NYSE: K) have to worry about consumers flocking to shelves devoted to the private labels.
If you're not trading, though, you could look at the business as a long-term bet on soup and juices (I love V8!). Heck, those are staple foods, and they're not going away.
Disclosure: I don't own any company mentioned; positions can change without notice.
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