November 24, 2015

VALUATION WATCH: Overvalued stocks now make up 49.77% of our stocks assigned a valuation and 18.45% of those equities are calculated to be overvalued by 20% or more. Nine sectors are calculated to be overvalued--one by double digits.

Soup's On

--Campbell's Reports Earnings And Raises Guidance

We continue monitoring earnings reports and, since we are entering the cold and flu season, we figured we'd take a look at one of the makers of everyone's favorite cold and flu remedy, Campbell's Soup (CPB). Campbell Soup Company, together with its consolidated subsidiaries, is a global manufacturer and marketer of high quality, branded convenience food products. The company operates in three business segments: Soup and Sauces, Biscuits and Confectionery, and Away From Home.

Campbell's has been troubled in recent years as sales of its once-popular condensed soups have foundered as consumers seek fresher alternatives and purchase fresh and hot options in grocery stores in lieu of breaking out the pan at home.

However, the company has aggressively cut costs and sought new options more appealing to today's shoppers. Campbell's, like many food giants, has been removing artificial flavors, colors, and high-fructose corn syrup from products. They also feature a diversified product line which includes popular ready-made pasta sauces such as the Prego brand, V8 and tomato juices, cooking broths and stocks, etc.

Today, the company reported Q1, 2016 earnings and included the following results:

Sales decreased two percent to $2.203 billion primarily due to the adverse impact of currency translation. Organic sales were comparable to the prior year as higher selling prices and a reduction in promotional spending were offset by volume declines.

Gross margin decreased from 35.3% to 34.3%. Excluding items impacting comparability in the current year, adjusted gross margin improved 2.6 percentage points. The increase in adjusted gross margin was driven by productivity improvements, higher selling prices, improved supply chain performance and lower promotional spending, partly offset by cost inflation.

Denise Morrison, Campbell’s President and Chief Executive Officer, said

These are unprecedented times of change. . . [But] consumers will purchase products from companies that align with their values. . . We are being really transparent about our products with our new website—whatsinmyfood.com—and we are talking about the ingredients we use and how it is made. . . We’re encouraged by our first-quarter performance. While organic sales for the quarter were comparable to a solid prior year, we recognize that we have more work ahead to improve our growth trajectory. I am particularly pleased that we delivered a third consecutive quarter of adjusted gross margin expansion with improved execution in our supply chain.

Campbell's has also revised its fiscal 2016 guidance. This revised guidance is based off recasted 2015 results for adjusted EBIT and adjusted EPS due to the previously discussed change in accounting for pension and postretirement benefits. The company expects adjusted earnings to grow to $2.75 to $2.83 a share, up from previous guidance of $2.53 to $2.58 a share for the fiscal year ending in July.

Below is today's data on Campbell's:

VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD recommendation on CAMPBELL SOUP for 2015-11-23. Based on the information we have gathered and our resulting research, we feel that CAMPBELL SOUP has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Book Market Ratio.

You can download a free copy of detailed report on CPB from the link below.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	49.89	0.20%
3-Month	50.43	1.29%
6-Month	51.21	2.85%
1-Year	50.98	2.38%
2-Year	56.70	13.88%
3-Year	55.50	11.47%

Valuation & Rankings
Valuation	11.76% overvalued	Valuation Rank(?)	30
1-M Forecast Return	0.20%	1-M Forecast Return Rank	66
12-M Return	12.72%	Momentum Rank(?)	77
Sharpe Ratio	0.40	Sharpe Ratio Rank(?)	78
5-Y Avg Annual Return	6.75%	5-Y Avg Annual Rtn Rank	71
Volatility	16.92%	Volatility Rank(?)	81
Expected EPS Growth	7.69%	EPS Growth Rank(?)	40
Market Cap (billions)	15.60	Size Rank	93
Trailing P/E Ratio	20.16	Trailing P/E Rank(?)	57
Forward P/E Ratio	18.72	Forward P/E Ratio Rank	35
PEG Ratio	2.62	PEG Ratio Rank	18
Price/Sales	1.93	Price/Sales Rank(?)	45
Market/Book	11.34	Market/Book Rank(?)	11
Beta	0.47	Beta Rank	68
Alpha	0.13	Alpha Rank	81

DOWNLOAD A FREE SAMPLE OF OUR CAMPBELL'S SOUP (CPB) REPORT BY CLICKING HERE
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