Campbell's Partnership With Green Mountain Coffee Roasters Will Be Mmm Mmm Good For Shareholders

| About: Campbell Soup (CPB)
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On Wednesday, Campbell Soup Company (NYSE:CPB) announced a new partnership with Green Mountain Coffee Roasters (NASDAQ:GMCR). The deal, which unites the number one soup brand with the number one coffee brewer, should have a large impact on Campbell's growth going forward. Investors seemed unimpressed, with shares up a marginal 0.4%. This should be your buying opportunity for this soup leader, who is going back to basics with a focus on soup.

Campbell will offer its soups through Green Mountain Coffee Roasters' proprietary Keurig expertise of sealing in ingredients and releasing at the right moment. The new products will include a K-cup pack and a packet of dry pasta and vegetable blend garnish. Campbell will launch three varieties of the soup beginning in 2014. The first three will include a version of the company's popular chicken noodle soup.

Campbell's president and CEO Denise Morrison had this to say of the announcement:

"This innovative partnership is a win for consumers and for both companies, and represents another step as Campbell expands into higher-growth spaces. Campbell is connecting with consumers in new and exciting ways. We expect this delicious Campbell's Fresh-Brewed Soup to provide consumers with a flavorful, convenient soup that fits their lives today."

The company is wisely re-focusing on soup, a food category that it has dominated. In fiscal 2013, soup sales increased 5%. Ready to serve soups saw sales increase of 9%. In the fourth quarter, soups and ready to serve soup sales grew 4% and 9%, respectively. The sales of soups with the Keurig brewer should help boost the simple meals and soups business segment.

To go along with the Keurig expansion, Campbell is expanding its ready to serve soup line in September for the NFL season. The company, through spokesman Clay Matthews, will launch new flavors hearty cheeseburger, spicy chicken quesadilla, and Philly-style cheesesteak.

In fiscal 2013, Campbell acquired three companies: Bolthouse Farms, Plum Organics, and Kelsen Group. I highlighted the Plum and Kelsen acquisitions in separate articles. Those acquisitions helped power growth for the fiscal year. In fiscal 2013, Campbell saw earnings per share grow 8% and total revenue grow 12%. Acquisitions were responsible for 11% of the full year's growth.

The new deal should continue to boost Green Mountain Coffee Roasters. With its Keurig device, the company dominates the single serve coffee brewing market. The company has expanded into juices and other drinks. With expansion into soup, Green Mountain Coffee should be even more appealing to investors. Analysts expect Green Mountain to post double-digit revenue growth in each of the next two years. Shares trade at a high valuation of 23.0 times next fiscal year's estimates. Shares could see a minor rally from analyst upgrades and further food product expansion launches.

Analysts on Yahoo Finance are expecting Campbell to post revenue growth of only 0.9% for fiscal 2014. Earnings per share are expected to climb a marginal 0.8% to $2.66. Revenue is expected to grow 1.7% in fiscal 2015.

I believe the three acquisitions, along with this growth expansion partnership from Keurig, will help Campbell post double-digit earnings per share growth in fiscal 2015. This would represent earnings per share of $2.93. This target gives shares a price to earnings of 14.6 at today's price. I believe shares are worth buying at these levels, trading down from 52 week highs of $58.83. With a focus back on soups, Campbell should be able to beat analysts' current growth expectations.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CPB over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.