Market Overview

Campbell Soup Seeks K-Cup Revenue Boost (CPB)

Both Dunkin' Brands (NASDAQ: DNKN) and Starbucks (NASDAQ: SBUX) have benefited in recent quarters from their partnerships with Green Mountain Coffee Roasters (NASDAQ: GMCR), as sales of Keurig K-Cups have provided a boost to their revenues. Now Campbell Soup (NYSE: CPB) is ready to ride that train.

Campbell and Green Mountain announced this week the launch of Campbell's Fresh-Brewed Soup K-Cup packs. Campbell earnings were down in the most recent quarter, so this partnership may provide it a boost as well, in a category that is not seen as particularly dynamic.

But how much of a boost? An industry expert told Marketwatch that while "it is a way for both companies to expand their offerings, it shouldn't amount to huge revenues for either."

See also: Campbell Soup Confirms Will Bring Soup to Green Mountain's Keurig Brewers

Campbell Soup

This leading maker of branded convenience food products posted EPS in the most recent quarter that were a little more than half what they had been in the year-ago period. The Camden, New Jersey-based company sports a market capitalization of almost $15 billion and offers a dividend yield near 2.8 percent. Its long-term earnings per share (EPS) growth forecast is more about six percent.

Note that the number of shares sold short in Campbell represented more than seven percent of the float as of the August 15 settlement date, though they were down about six percent from mid-July. The days to cover rose to almost 15, the highest level so far this year.

The consensus recommendation of the analysts surveyed by Thomson/First Call who follow the stock is to hold shares, and it has been for at least three months. Their mean price target, or where the analysts think the share price will go, is less than six percent higher than the current share price.

Note that the share price has fallen almost 12 percent in the past month, dropping below the 200-day moving average for the first time in more than a year. Over the past six months, the stock has underperformed competitors General Mills (NYSE: GIS) and Mondelez International (NASDAQ: MDLZ).

Dunkin' Brands

This operator and franchiser of quick-service restaurants said its profit doubled in the most recent quarter, due largely to strong sales. Dunkin' Brands has a dividend yield near 1.7 percent and a market cap of more than $4 billion. Its long-term EPS growth forecast is about 16 percent.

The short interest in this purveyor of doughnuts, coffee and ice cream was less than five percent of the float at mid-August. That was the smallest number of shares sold short since mid-June, and almost seven percent less than a month earlier. The days to cover rose from about four in the previous period to about seven.

Of the 22 analysts surveyed, eight rated the stock at Strong Buy and another two also recommend buying shares. The analysts' mean price target indicates that they see about five percent potential upside. That consensus target would be a new multiyear high for Dunkin' Brands.

The share price has retreated less than four percent since hitting the current high in early August. It is still up more than 30 percent year-to-date. Over the past six months, the stock has underperformed Starbucks but outperformed McDonald's (NYSE: MCD) and the S&P 500.

Starbucks

This global specialty coffee purveyor posted a record quarterly profit in its most recent report. Starbucks is headquartered in Seattle and it has a market cap of more than $55 billion. Its dividend yield is near 1.2 percent. The long-term EPS growth forecast of this S&P 500 component is more than 19 percent.

The number of shares sold short as of the most recent settlement date represented about one percent of the total float, after falling about 16 percent over the previous month. That was the lowest level of short interest in at least a year. The days to cover was about two.

Twelve of the 26 polled analysts rate the stock at Strong Buy and another 10 recommend buying shares as well. The analysts' mean price target is more than 10 percent higher than the current share price. Here too, the consensus target would be a new multiyear high.

The share price is about 30 percent higher than at the beginning of the year, though it has faced resistance near $72 in recent weeks. The stock has not only outperformed the broader markets over the past six months, but competitors Dunkin' Brands and McDonald's as well.

See also: You'll Never Believe That America's Favorite Coffee Is This Brand

At the time of this writing, the author had no position in the mentioned equities.

Posted-In: Dunkin' Brands General Mills green mountain coffee roasters keurig McDonald's Mondelēz International StarbucksTrading Ideas Best of Benzinga

 

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