Image source: Campbell Soup Company.

Campbell Soup Company (NYSE:CPB) released first-quarter earnings on Nov. 22, showing flat sales but rising earnings. After missing estimates last quarter and still in the midst of a recovery from a costly food recall, what can investors expect in the year to come?

Developments last quarter

After a rough patch for Campbell stock, investors are feeling relief as the company works through problems.

CPB Chart

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There was bad news surrounding the Campbell Fresh division earlier this year with the recall of Bolthouse Farms Protein Plus smoothies in the fiscal fourth quarter and poor execution in its carrot business that led to smaller carrots that displeased customers. The segment saw sales decrease 5% year-over-year in the fourth quarter. However, the Campbell Fresh division quickly returned to sequential growth, rising 5% from the fourth quarter to the first. The Campbell Fresh segment contributed 10% of sales in the first quarter. Overall sales for the company in Q1 were flat with last year's comparable period.

On the brighter side, profit as measured by earnings per share increased 52% from last year. Most of the gains were attributable to one-time expense items last year related to pension and post-retirement losses. Excluding the one-time items, profit still notched a 5% gain in spite of the flat sales figure. Profit rose on cost savings initiatives the company has been working on.

Campbell's outlook for 2017

While the company hopes to drive modest overall growth with its fresh and healthy eating options, the real focus for the coming year will continue to be efficiency. CEO Denise Morrison said that Campbell anticipates $300 million in annual savings by 2018. Getting more out of existing and established brands will also be key, including more cost savings by making food supply and delivery faster and cheaper.

Also on the agenda is getting the beverage and carrot businesses that operate under the Campbell Fresh division back up to speed. The company will be spending at least a couple of more quarters fully recouping from the setbacks seen earlier during the summer, but the recovery is already underway. Increased marketing has been started to help drive the mending process, but business is expected to be sluggish.

Morrison had this to say:

Across the industry, top-line growth remains sluggish. Simultaneously, food deflation is pressuring both top and bottom lines and limiting pricing opportunities. This is driving a hypercompetitive environment for market share along with a continued focus on cost savings measures to deliver earnings.

Despite the headwinds Campbell and the rest of the food industry are facing, management reiterated its 2017 guidance it issued a few months ago. It expects overall sales will come in anywhere from flat to up 1% year over year, being held back by pressures from the fresh and organic food segments. With the company still aggressively cutting costs, an increase in earnings per share is anticipated in the 2% to 5% ballpark.

Consider this

After struggling midyear, the soup company's stock is putting together a nice run to conclude 2016. However, as the company enters the new year, management thinks sales will continue to struggle because the Campbell Fresh division has some more kinks that need to be worked out. The saving grace here is that profits have been increasing even though the top line has struggled.

As Campbell Soup works out operational issues and gets the business back on track, pullbacks in the stock's price are an opportunity to buy more shares for existing owners of the company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.