December 3, 2021

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3 Factors That Make Campbell Soup (CPB) an Attractive Pick

Campbell Soup Company CPB is benefiting from robust growth efforts, which have been boosting investors’ optimism. Notably, shares of the company have gained 23.5% in the past year against the industry’s decline of 10.8%. Also, the stock comfortably outperformed the Zacks Consumer Staples sector’s decline of 14.3% in the same time frame.

Let’s discuss the factors that are likely to keep driving the company’s growth.

Portfolio Refinement Efforts to Drive Growth

Campbell has been focusing on its portfolio review and Board-led strategies to enhance the company’s performance and boost shareholders’ value. Markedly, Campbell plans to focus on two separate businesses in its key North American market — Campbell Snacks as well as Campbell Meals and Beverages. Keeping along these lines, the company concluded the sale of Arnott’s and certain International operations to KKR in December 2019. Further, Campbell divested its European chips business in October last year. Additionally, it divested Campbell Fresh in fiscal 2019 and Kelsen Group on Sep 23.  

Consequently, the Campbell Fresh and Campbell International segments are now part of its discontinued operations. These actions will help the company increase focus on the core North American market.

Strength in Snacks Business

Campbell is committed to shifting its overall portfolio toward the fast-growing snacking category, which is expected to form about half of Campbell’s proforma sales in future. In this regard, Campbell acquired Snyder’s-Lance in the third quarter of fiscal 2018, which is enhancing the performance of the global biscuits and snacks portfolio. Evidently, organic sales in the Snacks division improved 2% in the second quarter of fiscal 2020. The segment gained from advancements in Pepperidge Farm cookies, Kettle Brand, Goldfish crackers and Cape Cod. We believe that brands under the snacking category will continue boosting performance, backed by enhanced marketing and innovation.

Savings Plan Bodes Well

Campbell is progressing well with its cost-saving plan, which was announced in fiscal 2015. The company’s strategy of concentrating on supply-chain efficiencies along with curtailing costs and reinvesting part of these savings in areas with high growth potential is likely to drive growth. During the second quarter, Campbell generated savings worth $45 million as part of its multi-year, cost-saving program, which included synergies associated with the Snyder’s-Lance buyout.

Management anticipates generating cumulative annualized savings from continuing operations of $850 million by fiscal 2022 end.

We believe that cost savings along with Campbell’s prudent investments and strategic efforts toward product innovation and brand building are likely to help this Zacks Rank #2 (Buy) stock to continue to stay in investors’ good books.

Other Solid Consumer Staple Picks

e.l.f. Beauty Inc. ELF,with a Zacks Rank #2, has a trailing four-quarter positive earnings surprise of 62.50%, on average.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hain Celestial Group, Inc. HAIN, with a Zacks Rank #2, has atrailing four-quarter positive earnings surprise of 7.02%, on average.

Flowers Foods, Inc. FLO, with a Zacks Rank #2, has a trailing four-quarter positive earnings surprise of 2.18%, on average.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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