The world's top soup maker, Campbell Soup (NYSE: CPB), reported an 11% jump in its third-quarter profit, even as U.S. soup sales declined for a fourth consecutive quarter. The New Jersey-based company said it sees its fiscal 2011 results coming in at the high end of prior guidance, with flat sales growth and a slight decline in earnings growth.

A look at the numbers
Revenues in the quarter rose slightly to $1.81 billion from $1.80 billion in the year-ago quarter. The rise in revenues, although negligible, was mainly due to the strong performance of its baking and snacking segment (which includes Pepperidge Farm), where sales went up by 10% from a year ago.

Despite flat overall sales, net income rose by 11% compared with the same quarter last year. The earnings gain was fueled by lower marketing and selling expenses and favorable foreign exchange rates. Cash flow from operations for the first nine months of its fiscal year stood at $858 million. This robust figure should enable the company to go forward with its plans for increased innovation in the beverage and soup segments.

Areas of concern
U.S. soup revenues declined by 7%. Campbell sells about 2 million cans a year and still enjoys the highest market share in the nation -- about 60%. However, the company has struggled lately as demand for soup has fallen.

Strong competition from the likes of Progresso by General Mills (NYSE: GIS) and Healthy Choice from ConAgra (NYSE: CAG) has also weighed on margins. To help arrest this decline, Campbell has decided to increase its focus on innovation, brand-building, and advertising. If you're an existing or prospective shareholder, keep an eye on this trend.

Inflation could be a concern as well. Higher commodity costs are threatening to escalate into a major economic issue globally, and industry leaders such as PepsiCo (NYSE: PEP) and Kraft Foods (NYSE: KFT) have cautioned that higher commodity prices would affect profitability as they're forced to raise prices. Campbell plans a price increase in the coming quarter to offset higher input costs.

The Foolish bottom line
The company has predicted that sales this year would show a marginal increase of about 1%. But Campbell also predicts that its year-end earnings per share will fall by around 1% to 3% from its $2.47 showing in fiscal 2010. If you're a shareholder, it's best to remain cautious, at least for the time being.

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