Although Campbell Soup Company CPB has been making efforts to focus on healthier foods, growth in the Campbell Fresh division is expected to be slow, Argus’s John Staszak stated in a report. He downgraded the rating on Campbell Soup from Buy to Hold, saying that FY17 is likely to be a transition year during which the company reinvests in its businesses.
The Campbell Fresh division posted lower sales in fiscal Q4. Campbell Soup reported net sales of $1.69 billion, down 1 percent y/y, missing the consensus expectation by $3 million. The decline was on account of currency headwinds and weak organic revenue, analyst Staszak mentioned.
Organic revenue was down 1 percent, while adjusted EPS declined by 6 percent to $0.46, reflecting a lower gross margin and higher promotional spending.
Looking At FY17
Staszak expects FY17 to be a year of transition as Campbell Soup reinvests in its businesses. The EPS estimate for FY17 has been reduced from $3.24 to $3.02.
View On Stock
Campbell Soup’s shares are trading below the average multiple for “four other food and beverage companies in our coverage group,” the analyst commented, adding that this discount is warranted in view of the company’s prospects for relatively slow earnings growth over the next year.
Staszak further recommended shares of Tyson Foods, Inc. TSN for “investors seeking to invest in a food company with better near-term growth prospects.”
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