Campbell Soup Company (CPB): Soup Anyone? – General Mills, Inc. (GIS), Kraft Foods Group Inc (KRFT)

Competitor:

• Campbell Soup Company (NYSE:CPB) doesn’t have direct competitors but I have tried to compare Campbell to General Mills, Inc. (NYSE:GIS) , and Kraft Foods Group Inc (NASDAQ:KRFT) . Important to note, these competitors have much larger market capitalization as compared to Campbell. General Mills: $30 billion, Kraft: $28 billion, Campbell: $13 billion.
• General Mills, the well-known manufacturer and marketer of branded consumer foods, recently announced lower 3Q12 earnings of $0.54-$0.56 and revised its FY2012 adjusted diluted EPS guidance to $2.53-$2.55. Its previous guidance was $2.59-$2.61. However, at the CAGNY it reaffirmed its previously provided  FY2013 guidance of $2.65 and $2.67. While organic growth is expected to be in low single digits it expects to benefit from the recent acquisition of Yoki in Brazil and Yoplait yogurt business in Canada.
• On the other hand, Kraft recently revised its financial outlook for 4Q12 and expects sales to decline by 10.7% y-o-y vs. 9.2% in 4Q11. This is mainly due to greater-than-anticipated trade inventory reductions, offset by strong gains from cost-savings measures.
• Campbell tops the three on the basis of EBITDA margins and Return on Equity. However, on the debt side, Campbell is in line with its competitors when compared on the basis of Debt/EBITDA ratio and Debt/Equity ratio. For details, please refer to adjacent chart.

Conclusion:

In my opinion, Campbell Soup Company (NYSE:CPB) is attractively valued at 15 times earnings, backed by strong expected 10% growth, excellent share buybacks, and an increasing dividend (it increased its dividend even during the recession). Furthermore, the company has made significant progress in stabilizing its soup business and its CEO Denise Morrison has no intention of slowing down, announcing the launch of 200 new products worldwide in the next year. However, one should remain cautious with respect to its margins given its dual mandate of growth, which may result in lower margins given heavy dependance on lower-margin categories outside of soup.

The article Soup Anyone? originally appeared on Fool.com.

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