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Conventional wisdom is that soup sales are slowing and this is adversely impacting Campbell Soup Company (CPB). There is evidence to support this notion; not only are traditional soup sales declining but increased competition and product fragmentation from lower-cost private store labels are eating into Campbell sales revenue.

Campbell's Brands

But Campbell Soup is so much more than soup. Sure, we've all come to know the iconic soup cans; one version or another of Campbell Soup can brands has been on grocery store shelves for more than one hundred years. There is Campbell Condensed Soup, Healthy Request Soup, Chunky Soup, Microwavable Soup, Low Sodium Soup, soup stock, Campbell's tomato juice, gravies, and pastas. But other growing brands include Pace Picante Sauce and Salsa, Pepperidge Farm products including breads, cookies and Goldfish Crackers, Prego Italian Sauces, Swanson Broth and Stock and Swanson Chicken, V8 Vegetable Juices and V8 Fusion & Splash (see here).

Campbell products are sold in 120 countries around the globe. In addition, there are three product lines targeted at Asian Pacific markets and eight specific Brands sold only in greater Europe. And the company continues to leverage its brands in ever expanding line extensions like the soon to launch Campbell Signature Soups

Traction under the new CEO

The turn-around story is largely based on new leadership in the person of Denise Morrison who became CEO just over a year ago on August 1, 2011 after holding positions of increasing responsibility at the company since 2003. She is a leader that came up through the ranks of Procter & Gamble (PG), Kraft (KFT), PepsiCo (PEP), Nestle, (OTCPK:NSRGY) and Nabisco - thus a great deal of consumer and food-product experience. Ms. Morrison has made aggressive, and even painful moves, including the just-announced closing of the underperforming and outdated Sacramento plant that opened in 1947, set to close by July 2013 displacing 700 employees. These are tough decisions made at the top but appear to be the correct move for the company's long term viability.

Currently the company pays an annual dividend of $1.16 yielding 3.3%. Dividends have been paid since 1902. Consecutive dividend increases have been made for eight years. I like the stock because of its growth potential but mostly because it fits nicely into an income-oriented portfolio. The company offers a low cost direct stock purchase plan with a dividend reinvestment program.

Share repurchase program

From the company statement of year end results (see here):

In fiscal 2012, Campbell repurchased 12.6 million shares for $412 million under its $1 billion strategic share repurchase program announced in June 2011 and the ongoing practice of buying back shares sufficient to offset those issued under incentive compensation plans. Total return for the last twelve months is 14.25 percent.

Additionally, fiscal 2012 results show the company continues to invest in advertising - smart for future growth.

Key Stats with direct competitors General Mills (GIS) and H. J. Heinz (HNZ)

Campbell Soup

General Mills

H. J. Heinz

Market Cap

$11.07B

$25.93B

$18.16B

Trailing P/E

14.6

15.7

19.8

EPS

2.41

2.56

2.96

PEG (5 year expected)

2.94

2.11

2.36

P/S

1.43

1.54

1.55

Annual Dividend Yield

3.3

3.3

3.7

Source: Yahoo Finance

Campbell Soup is the smaller of the three direct competitors in terms of market cap but has the greatest 5-year PEG and the lowest P/E. Plus, 44% of the company is held by insiders.

For more information on Campbell Soup check the website.

Continue to Part 2 >>

Source: Taste The Turnaround At Campbell Soup, Part 1