Campbell’s Guidance Is mmm Good, And So Is The Price

A Buying Opportunity In A Higher-Yielding Comfort Stock

Campbell Soup Company (NYSE:CPB) is one of the best stories coming out of the pandemic. The company had its brand reinvigorated, saw demand surge across all segments, has an outlook for sustained growth, pays a dividend, offers shareholders a good value, and yet the Q4 report sent prices moving lower. My first reaction was what a buying opportunity and from what I can see on the chart, after the open of trading, most of the market agrees with me.

The Results Are In, Guidance Is Raised At Campbell Soup Company

Campbell Soup company rounded out its turnaround year with a great 4th quarter. After a disappointing start to the year, cost-saving and restructuring efforts began to pay off in tandem with the pandemic demand. Organic sales saw a marked uptick in the 3rd quarter that accelerated into the 4th. Now, with the company’s momentum building the outlook is brightening.

Revenue in the 4th quarter came in at $2.11 billion or up 18.5% on a YOY basis with strength in all segments. That beats consensus by $40 million or 1.8% and is expected to stick. On a segment basis, Meals&Beverages grew 28% in the quarter while Snacks trailed with 11% growth.

 The company says results are “driven by favorable volume in both Meals & Beverages and Snacks reflecting a continued increase in demand as at-home food consumption remained elevated.” On a full-year basis, the 4th quarter strength was enough to produce 7% revenue growth and 28% EPS growth.

The bottom line results are a little mixed. GAAP earnings of $0.28 missed by $0.22 but adjusted beat by $0.63. Adjusted earnings grew more than 100% on a YOY basis on a combination of supply chain productivity improvements, product mix, and cost-saving initiatives. The company’s efforts saved $45 million in Q4 bringing the YTD total to $165. The total cost savings associated with the Snyder-Lance takeover have topped $735 million to date.

Looking forward, Campbell Soup Company expects demand to remain elevated through the first quarter at least. Guidance has revenue growing 5% to 7% and EPS closer to 25% versus the consensus of 4.5% and 20%.

Campbell Soup Is An Undervalued High-Yield Consumer Stock

Campbell Soup Company is a great dividend payer and only getting better as the pandemic wears on. With shares trading near $51, it pays about 2.7% compared to Clorox (NYSE:CLX) and Hormel (NYSE:HRL) which are the highest-valued consumer stocks in the market. Clorox is paying about 2%, Hormel, about 1.8%, and both are trading at much higher valuations than Campbells. Clorox is trading about 29X its forward earnings, Hormel about 30X, while Campell Soup Company is a bargain at a mere 17X earnings.

A Buying Opportunity In Campbell Soup Company

The 2Q earnings report, for all its good news, sparked a sell-off in share prices that have opened up another buying opportunity. Price action gapped lower at the open but opened well-above a key support level and have only moved higher since. Support is near the $49 level and may not be touched again soon. Price action still has some resistance to overcome but I don’t think it will last long. Bargain hungry income investors are scooping up this tasty treat.