Campbell Soup Company Earnings Cheat Sheet: Fifth Straight Quarter of Shrinking Margins as Net Income Falls

S&P 500 (NYSE:SPY) component Campbell Soup Company (NYSE:CPB) reported its results for the first quarter. Campbell Soup, with its consolidated subsidiaries, is a global manufacturer of convenience food products.

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Campbell Soup Company Earnings Cheat Sheet for the First Quarter

Results: Net income for the processed and packaged goods company fell to $265 million (82 cents per share) vs. $279 million (82 cents per share) a year earlier. This is a decline of 5% from the year earlier quarter.

Revenue: Fell 0.5% to $2.16 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: CPB beat the mean analyst estimate of 80 cents per share. It fell short of the average revenue estimate of $2.21 billion.

Quoting Management: Denise Morrison, Campbell’s President and CEO, said, “As we’ve previously stated, fiscal 2012 will be a year of investment as we establish the foundation for the next era of profitable growth at Campbell. While it is early in this transition year, our efforts to stabilize U.S. Soup profitability are on track. As planned, we raised prices in response to inflation and reduced ineffective marketing spending, which led to improved profits despite anticipated volume declines. Specifically, we engaged in significantly less promotional spending. We also commenced our U.S. Soup advertising later in the quarter to coincide with the start of soup season. This is part of a planned, full-year timing shift of our media dollars into the soup season where they are most effective.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.6 percentage points to 39.5% from the year earlier quarter. Over that time, margins have contracted on average one percentage point per quarter on a year-over-year basis.

The company has now seen net income fall in each of the last two quarters. In the fourth quarter of the last fiscal year, net income fell 11.5% from the year earlier quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 6 cents in the fourth quarter of the last fiscal year and by 5 cents in the third quarter of the last fiscal year.

A year-over-year revenue decrease last quarter snaps a streak of two consecutive quarters of revenue increases. Revenue rose 5.9% in the fourth quarter of the last fiscal year and 0.6% in the third quarter of the last fiscal year.

Looking Forward: Expectations for the company’s next quarter performance are more favorable than they were a month ago. The average estimate for the second quarter is now at 65 cents per share, up from 65 cents. For the fiscal year, the average estimate has moved down from $2.38 a share to $2.37 over the last sixty days.

Competitors to Watch: TreeHouse Foods Inc. (NYSE:THS), The Hain Celestial Group, Inc. (NASDAQ:HAIN), McCormick & Company, Inc. (NYSE:MKC), H.J. Heinz Company (NYSE:HNZ), Ralcorp Holdings, Inc. (NYSE:RAH), ConAgra (NYSE:CAG), SYSCO (NYSE:SYY), United Natural Foods (NASDAQ:UNFI), General Mills (NYSE:GIS), Kellogg (NYSE:K), Kraft Foods (NYSE:KFT), Sara Lee (NYSE:SLE) and Pepsico (NYSE:PEP).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)