It was a down day for the markets as a whole yesterday, but as always, some stocks bucked the trend. CampbellSoup (NYSE: CPB) shares rose on the release of the company's third-quarter earnings. That said, I'm not yet ready to grab a spoon.
Campbell's data shows a solid quarter. Net sales rose 6% to $1.8 billion. Operating income increased 11% to $303 million. Net income appreciated 14% to $166 million, or $0.40 per diluted share.
Although Campbell Soup is not a rocketing growth story, it nevertheless achieved solid performance this time around. U.S. soup sales increased 15% for the quarter. The Pepperidge Farm brand is doing quite well, growing 11% on a 6% volume expansion. The Pepperidge Farm cookie operation was driven by reported double-digit growth in Goldfish crackers, while Texas Toast bread drove the company's frozen-foods division. The Godiva Chocolatier operation saw strength in Asia and Europe, while the Away From Home business did well in the U.S. and Canada.
Although there isn't a cash flow statement attached to the earnings report, we can spot one refreshing statistic. Cash flow from operations during the first three quarters of the fiscal year totaled $977 million, a 27% increase year over year. In another encouraging sign, long-term debt decreased 25% to $1.9 billion, and total debt remained essentially flat at $2.9 billion.
Campbell Soup is doing well managing its various businesses; its efficiency initiatives and marketing efforts seem to be panning out right now, and it's holding the fort down against competitors like Kraft (NYSE: KFT) and PepsiCo's (NYSE: PEP) Frito-Lay division. The company hiked its earnings guidance, which was probably the biggest driver for Campbell shares' 3.3% increase by the close of trading yesterday. Campbell Soup now expects full-year earnings growth between 9% and 10%, up from 5% to 7%.
While I concede that things are certainly rosier for the company, I have to reiterate that this stock isn't on my list of best investment ideas. I'd need a few more quarters like this to convince myself that it could be one of those steady-but-slow-and-boring long-term positions. I looked at the company last year and came away with a bearish outlook.
I'm not ready to hop in the kitchen with Campbell Soup just yet, but if the company can continue to show that it's once again committed to the dividend game (its dividend history is not the best, given its payout cut several years ago), I might warm up to it. For now, I'm willing to give credit where credit is due, but I'd prefer to wait for a better yield and a stronger indication of the company's future.
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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
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