CHICAGO – Campbell Soup Co. (CPB) Monday posted a 31 percent increase in quarterly net income, boosted by a tax settlement and higher prices on soups and other products, and its shares rose 4 percent.
Even excluding one-time items, the company posted a better-than-expected 8 percent rise in earnings, as the price increases helped offset rising costs of commodities, packaging and energy.
Though price increases cut into sales volume, sales of higher-margin condensed soups — the kind sold in Campbell's iconic red and white cans — rose 1 percent in the United States, helping profitability.
"The core and more profitable condensed soup and broth businesses posted growth despite tough (comparisons)," Pablo Zuanic, analyst at J.P. Morgan Securities, said in a research note. He rates Campbell shares "overweight."
The quarter compares with a strong year-earlier period, when Campbell spent heavily on promotions to help spur soup sales, while rival General Mills Inc. (GIS) raised prices on its Progresso soups.
Earlier this year, Campbell raised suggested retail prices on its namesake soups and some other products by an average of 4.8 percent to offset rising costs.
The company, which also makes Pepperidge Farm cookies and crackers and Godiva chocolate, said profit was $302 million, or 73 cents a share, in the fiscal first quarter ended Oct. 30, compared with $230 million, or 56 cents a share, a year earlier.
Earnings in the 2006 first quarter included a $60 million benefit for a tax settlement related to transactions involving government securities, an $8 million tax expense related to repatriating earnings from non-U.S. subsidiaries and a $13 million gain on an adjustment in how the company accounts for inventory.
Excluding one-time items, earnings were 58 cents a share. On that basis, analysts on average forecast 56 cents, according to Reuters Estimates.
Sales rose 1 percent to $2.11 billion. Analysts on average forecast $2.13 billion.
Changes in the company's promotional strategy particularly hit sales of ready-to-serve soup in the United States. Sales volume fell 17 percent in that segment, which was also hurt by Campbell's decision to drop its Kitchen Classics line of soups.
Total sales in the company's U.S. soup, sauces and beverages unit fell 2 percent to $970 million.
Looking forward, Campbell also said earnings for fiscal 2006, ending in July, would be up 5 percent to 7 percent from an adjusted $1.64 a share a year earlier.
Campbell also said its board of directors has authorized the repurchase up to $600 million of its stock through the end of fiscal year 2008.
Campbell shares were up $1.09 at $30.79 Monday on the New York Stock Exchange.
Before Monday, Campbell shares had fallen about 4 percent since Sept. 12, when the company reported fourth-quarter earnings. That compares with a decline of about 3 percent for the Dow Jones U.S. Food Producers Index.
The stock trades at about 16.8 times estimated fiscal 2006 earnings, compared with a multiple of about 16 percent for the index.