CAMPBELL SOUP CO. $36 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 335.7 million; Market cap: $12.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; WSSF Rating: Above Average) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.
The company gets 30% of its sales from international markets. Its biggest foreign markets are Australia and Europe.
Campbell looks overseas for growth
Like Heinz, Campbell aims to spur its long-term growth through higher sales in emerging markets. It now sells its soups in 22 Russian cities, and aims to reach 100 cities in the next few years. In China, Campbell recently launched a low-cost can of broth. Canned foods account for a tiny fraction of total food consumption in these countries, so there’s lots of room to grow.
Campbell is also developing more healthier products. For example, it now sells low-sodium soups and vegetable drinks, as well as baked goods made from whole grains. These premium products generate higher profit margins than Campbell’s regular products.
The company’s sales rose 16.0%, from $6.9 billion in 2006 to $8.0 billion in 2008 (fiscal years end July 31). Sales fell to $7.6 billion in 2009, but rose to $7.7 billion in 2010.
Earnings rose from $1.73 a share (or a total of $720 million) in 2006 to $1.99 a share (or $792 million) in 2007. In 2008, the company sold its Godiva chocolate business for $850 million. As a result, earnings fell to $1.75 a share (or $671 million). Earnings improved to $2.42 a share (or $844 million) in 2010. If you exclude unusual costs, the company would have earned $2.47 a share in 2010, up 11.8% from $2.21 in 2009.
Campbell’s total debt of $2.8 billion is a low 23% of its market cap, so it can easily afford to make acquisitions and invest in new products. It also holds cash of $254 million, or $0.76 a share.
Earnings should grow to $2.63 a share in fiscal 2011. The stock trades at 13.7 times that figure.
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