What happened
Shares of Campbell Soup (CPB 0.01%) were up more than 9% as of 1:30 p.m. EDT on Wednesday following the release of its third-quarter results.
So what
Campbell Soup's net sales from continuing operations rose 16% year over year to $2.2 billion, boosted by its $6.1 billion acquisition of snack food company Snyder's-Lance in March 2018.
The venerable food company is reshaping its portfolio to better focus on its two core businesses, Campbell Snacks and Campbell Meals and Beverages, which possess "iconic brands and strong market positions," according to CEO Mark Clouse. As part of this process, the company recently divested its Campbell Fresh division via the sales of its Bolthouse Farms and Garden Fresh Gourmet businesses.
Campbell's Soup is focusing its efforts on its higher-performing brands. Image source: Getty Images.
Additionally, Campbell Soup is raising prices and making supply chain improvements to offset cost inflation, actions management says are helping to stabilize Campbell Soup's profitability. "Our results this quarter were ahead of our expectations, making it the third consecutive quarter that we met or exceeded our outlook," Clouse said in a press release. "I am also pleased to see profitability trends are improving, driven by sequential gross margin improvement."
All told, Campbell Soup generated adjusted earnings per share from continuing operations of $0.56. That was down 5% from the prior-year quarter but above Wall Street's expectations of $0.47.
Now what
These strong results prompted Campbell Soup to raise its full-year profit forecast. Management is now guiding for adjusted EPS of $2.50 to $2.55, up from its prior forecast of $2.45 to $2.53.
Still, investors should keep a critical eye on the company's condensed and ready-to-serve soup businesses. Sales in these important categories are likely to remain under pressure as consumers shift away from processed foods and toward more natural varieties.
With that in mind, shareholders may want to tune into Campbell Soup's investor day presentation on June 13, during which management will discuss the company's strategic growth plans.
