I'm not a fan of soup; never had the stuff in my life. But I notice that Wall Street is liking Campbell Soup's (NYSE: CPB) stock today; at the time of this writing, the shares are up a little over 6%. Guess there's money to be made in that soup stuff, no matter what I may think.

For the second quarter, Campbell saw a 7% rise in net sales. Earnings from continuing operations were $0.67 per diluted share for the quarter compared to $0.65 per diluted share for the year-ago period. Gee, that doesn't sound like such hot growth. But as some articles have observed, Campbell's stock has been sold off in recent months, so this is sort of a buy-on-the-news scenario. Plus, total soup sales increased 4% in Q2, and the baking/snacking segment increased its top line by 8% -- those iconic Goldfish crackers will not be stopped, let me tell you. And you know what else is doing well? Those V8 V-Fusion beverages. I've been drinking a ton of that stuff lately; those drinks really are superb. Gross margin was down, though. I don't like that, but I do enjoy the fact that operational cash flow increased for the first half of the year: that metric came in at $442 million...in the previous comparable period, Campbell booked $328 million. Campbell recently decided to dump its Godiva brand.

I didn't find this earnings report so exciting, but Campbell Soup is like Kraft (NYSE: KFT), Kellogg (NYSE: K), General Mills (NYSE: GIS), and Hershey (NYSE: HSY) -- it has a valuable portfolio of foodstuffs that people buy every day, and it pays a dividend that should go up over time. It's not my favorite dividend-reinvesting name right now, but it'll be around for the long term. And even though I am not helping out investors by shunning soup, I do have to reiterate my love for those V8 Fusion drinks -- believe me, I'm aiding the company significantly on that front.

Recently released earnings from Campbell Soup Company (NYSE: CPB) are a mixed bag. Sales of the company's signature product, soup in whatever form, are down. Sales are not down by a lot, but down nevertheless. Overall, total sales increased 7% to $2.3 billion, but almost half of that increase was due to currency exchange, not organic growth. EPS increased 6% to $0.70, but some of that gain was due to a $78 million stock repurchase that reduced the number of shares outstanding by 2 million. In many divisions, costs rose more quickly than prices, thereby depressing gross margins. Overall, cost of sales increased as well. Higher advertising and promotional expenses, coupled with a $104 million increase in net debt, caused a decrease in cash flow from operations. CEO Douglas Conant is optimistic that the current winter quarter, always a good season for soup sales, will deliver better numbers.

Soup sale declines were counteracted by increases in sales of Swanson broth, various types of V-8 juices and Prego pasta sauces. US baking and snacking sales increased 10% to $532 million, half the soup division revenue. Increased snack sales were led by the humble Goldfish cracker and other Pepperidge Farms baked goods.

Worldwide sales of Godiva Chocolate increased at least 10%. So why is Campbell looking to offload the brand? Campbell soups are now beginning to be available in Russia and China. The company hopes to see incremental additions to the bottom line from those two markets shortly. The company is sticking with its FY 2008 guidance of 3-4% sales growth rate and 5-7% EPS growth rate, acceptable numbers as long as the major driver of growth is organic and not currency exchange.

The first paragraph of Campbell Soup Company (NYSE: CPB)'s 4th Quarter 2007 earnings report is a textbook lesson in corporate double speak. The press release headlines trumpet that fiscal year earnings per share (EPS) was up 13%, and sales up 7%. Good news, right? Not exactly. It's good news when sales are up AND earnings are also up, which is not the case with Campbell Soup. Investors do not care primarily what drives sales. Investors care what drives earnings, also known as profits, what we get to keep. So while 4th quarter sales were up 10% for the quarter to $53 million, despite the fact that some types of soup sales were flat, earnings were down 30% to $0.14 per share. That is the number that matters.

The big news for Campbell Soup is that, having spent quite a sum of money in preparation, the company is now ready to launch soup sales in both Russia and China, the world's two largest soup markets. Presently, the company has not released tentative figures of what it hopes sales and revenues will be in these two new markets. For fiscal year 2007, Campbell Soup did $1.4 billion in international sales, not counting Russia and China.

Like many food manufacturers, Campbell Soup is faced with rising costs for raw materials. The company has instituted cost cutting programs on the one hand, while increasing quarterly marketing expenses by 15% on the other. For the fiscal year, cash flow was reduced by almost 50% (not a typo) while the company repurchased 30 million shares at a cost of $1.14 billion. There are some good pieces of news in the earnings report. Sales of V-8 Juice, Prego pasta sauces, and Pace Mexican sauces all increased, as did sales of ready-to-serve soups. The company attributes some of the soup sale increase to the gravity-fed shelving systems in place in many grocery stores. This negates the need for customers to have to root around at the back of shelves for cans of the desired variety. Sales of Pepperidge Farms baked products increased but so did the marketing expenses associated with that sales increase. Goldfish crackers continued to be a big seller, offset by declines in cookie sales. (I know I did my part with cookie sales.)

Campbell Soup forecasts fiscal year 2008 sales growth of 3-4% over 2007 net sales of $7.867 billion, and diluted EPS growth of 5-7%. The stock closed on 6 September at $36.68, down $1.32 on news of earnings decline.

[photo mccheek]