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.

As the economy continues to struggle and unemployment remains high, food stocks have held up very well. Everyone has to eat, right? Campbell Soup (NYS: CPB) might be a tastier meal than most. Last week the company reaffirmed its 25 cents per share dividend, giving it a yield in the 3-4% range. The Piqqem Sentiment for Campbell is a strong positive with sentiment trending upwards over the past month.

Campbell Soup Co. (NYSE: CPB) is headed into the comforting warmth of the earnings confessional on Monday morning, when the venerable foods company will announce second-quarter results. Analysts are predicting revenue of $2.21 billion on earnings of 64 cents per share, a nickel-per-share less than the year-ago profit.

In its first quarter, Campbell saw overall profit drop 3.7% amid high costs for materials. This strain, analysts say, may be slowly subsiding, which could be a bit of good news for Campbell and other food producers.

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.

Known for some of the best soup recipes on the island of Manhattan and immortalized in a famous 1995 episode of Seinfeld, the "Original SoupMan," may find himself in a soup kitchen of a different kind if his chain's financial troubles persist.

Al Yeganeh was reportedly the real-life inspiration for Seinfeld's uncharitably nicknamed "Soup Nazi" (portrayed by Larry Thomas), who refused service to George Costanza and Elaine Benes. Yeganeh was not interested in profiting off the Seinfeld name, however, discouraging employees from referencing the sitcom and frowning upon his supposed "nickname."

While he is known for his tight-ship practices and regimented way of doing business, he is also known for his exquisite varieties of soup. But even the best crab bisque, turkey chili or even Mulligatawny may not be able to save the Original SoupMan chain from angry franchisees and frustrated customers.

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]

The soup market must be simmering if today's earning report from Campbell Soup Co. (NYSE:CPB) is any example. Its quarterly earning jumped from $146 million in 2006 to $217 million, attributed in part to an increase in marketing and a price hike. EPS rose from $.35 to $.55 in the same interval.

Two sectors performed particularly well for the company. Its low-sodium soups exceeded expectation. (Why do I envision legions of Campbell's consumers reaching for their saltshakers? We shop with good intentions, but...) The V-8 brand also pulled in healthy numbers, which reinforces my contention that the best vegetable is one that can be mixed with vodka.

The only decline reported was in the competitive salsa market, where the Pace brands declined. Another Campbell brand, Godiva Chocolatier, was up, primarily due to Asian sales. The Midwest's Valentine's Day snowstorm (aka Massacre, if you're a florist), was blamed for some loss of sales.

Adding to the sustained value of the stock is Campbell's stated intention to repurchase $600 million of its shares with the proceeds of the recent sale of its UK holdings. The company boosted its year-end forecast slightly to $1.94-$1.97.

Where are people making money? According to Jim Cramer on tonight's MAD MONEY, it's in the LBO market. He noted that KKR is actually down in Netherlands since coming public. If you're going to make some money, you'll need to get close to an LBO, and tonight Cramer recommended a private label food company called TreeHouse Foods Inc. (NYSE:THS) as a great play in LBOs. The company is, among other things, the leading supplier of private-label pickles and non-dairy powdered creamer in the U.S.

The soup and baby food units and others are helping it. The company is not just a food company, it's a leveraged buyout play. The owners have done this before with Keebler by flipping it to Kellogg Company (NYSE:K). He thinks THS is worth betting on. The food business is slow and non-growth in general, but this company is an acquisition company and it is growing earnings with select acquisitions.

He has profiled THS before, but the company has grown since. Now it has a high enough share price to go out and make deals -- so he would be a buyer of THS right now even at the 52-week high.

THS has a $18.33 to $30.50 52-week trading range. THS closed up 1.5% at $30.64, a new 52-week high and above the old high noted from Friday; it traded up another 4% to $32.00 after Cramer touted this stock.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers. [Photo Stefan Powell]