Don't Believe the Hype, Campbell Soup's (CPB) Stock is Poised to Outperform - Goldman Sachs
"1QFY13 results were mixed but management's rhetoric suggesting soft sales and earnings growth in 2QFY13 was disappointing to us," the firm comments. "It is clear to us that CPB's business is not yet firing on all cylinders with its beverage business now softening just as soft spots, such as Australia, are firming up. But we continue to believe that CPB's future rests on the prospects of its core US soup business and we remain constructive on this front."
Goldman said it is encouraged that CPB posted its second consecutive quarter of soup sales growth after two plus years of declines. They believe reported trends will continue to firm up and view management's 2Q guidance as "overly conservative."
CPB's soup innovation, arguably its most impressive in a decade, continues to gain distribution, the firm notes. Investment is ramping up in its new marketing campaign. In addition, consumption comparisons become "exceptionally easy" in the months ahead, Goldman notes. "These factors fuel our belief that soup shipments will continue to improve, even with inventory headwinds in 2Q, and that the stock can continue to grind higher," the analyst comments.
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Shares of Campbell Soup closed at $36.21 yesterday, with a 52 week range of $31.22-$37.16.