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Campbell Soup: Upgrading On Coronavirus Tailwinds

May 05, 2020 8:19 AM ETCampbell Soup Company (CPB)3 Comments
Alexander Veytsman profile picture
Alexander Veytsman


  • Secular growth in Campbell Soup's products is driving the top line, which in turn fuels our BUY thesis.
  • April sales are exceptionally strong - and it's not only about the soup.
  • Online presence remains key, nearly entirely offsetting the decline of the offline sales.

We are ready to admit when we were wrong: our Neutral thesis was too conservative and we should have upgraded Campbell Soup (NYSE:CPB) back in 2019. The company is currently approximately 15% from its 52-week high, which is relatively in line with the S&P 500 index. At present, we see clear tailwinds that should allow CPB shares to reclaim the 52-week high of ~$58 in the near term and possibly go beyond.

About the Company:

Campbell Soup (CPB) is a food company, which manufactures and markets food products, with its core segments divided into Americas Simple Meals and Beverages (includes retail and food service channel businesses, such as Campbell's condensed and ready-to-serve soups; Swanson broth and stocks; Prego pasta sauces; and Pace Mexican sauces) and Global Biscuits and Snacks (includes Pepperidge Farm cookies, crackers, bakery and frozen products, and Arnott's biscuits.).


We now see a valuation multiple of 21x as appropriate for 2020 earnings: it consists of 17x for the average industry comps and about 4x for the beverage premium and its margins. When we apply this multiple to our EPS estimate of $2.76 (up from $2.55), we reach a target price of $58 (up from $48). Our rating is Neutral.

Why We Are Now Bullish:

Bottom line leads the way: What’s interesting about the Campbell story is that improvements began 1) before coronavirus started; 2) they were initially bottom line-driven, as some SG&A transformations have taken place around the company. In other words, the setup was already strong for even more tailwinds that unexpectedly took place.

Secular growth in demand for soup products: Both US and international demand expanded with the lockdowns, with China leading the way since January. We estimate incremental demand increase anywhere between 3-6% during the first quarter, beginning in Asia, continuing in February in Europe, and finally hitting the North

This article was written by

Alexander Veytsman profile picture
Alexander Veytsman's areas of expertise are long/short equities, as well as the macroeconomic trends of the US economy. Opinions expressed in the published articles are exclusively his own, and not affiliated with any company.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.

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Comments (3)

Old Professor profile picture
Is this a lasting turnaround for an iconic company long thought to be slowly fading to black, or is it a temporary reprieve resulting from COVID-19?
Bim Ska La Bim profile picture
Hi OP... truth is in the middle, I think. Pantry loading is definitely a thing, but it won't last.

Going forward, people people will always have a can or two of the high-salt soup (Well Yes is waaay better here), but not like now.

Looking forward, the Snyder's line of snacks looks like a great add...those in charge just have to execute. That's a big "ask."

Campbell's has a place, though - most people don't know left from right in the kitchen. :0)
Old Professor profile picture
@Bim Ska La Bim Thanks for yours. I do believe getting good leadership has been a challenge.
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