Campbell Soup earnings soar 31%

Campbell Soup Co.'s third-quarter profit beat analysts' expectations on strong results from most of its product lines.

Net income at the Camden company, whose brands include V8, Pepperidge Farm and Godiva, shot up 31 percent to $217 million, or 55 cents per share, from $166 million, or 40 cents per share, in the same period last year.

Those results included a $13 million after-tax gain from the reduction of its legal reserves and a $25 million after-tax benefit from the settlement of an issue related to royalties at Campbell's Canadian subsidiary.

Even without those gains, Campbell net income was up 23 percent, to $179 million, or 45 cents per share, from $146 million, or 37 cents per share, in last year's third quarter, excluding $20 million in profit from operations that were sold.

Revenue for the quarter ended April 29 rose 8 percent, to $1.87 billion from $1.73 billion in the same quarter a year ago. Sales in Campbell's biggest business, U.S. soup, were up 10 percent in the quarter, following a 15 percent gain in the year-ago period.

For the second quarter in a row, Campbell boosted its earnings outlook for the fiscal year. The company said it expected growth of 12 percent to 14 percent in earnings per share. Three months ago, it projected growth of 10 percent to 12 percent.

"We're beginning to hit on all cylinders," Douglas R. Conant, Campbell's president and chief executive officer, who has been at the 138-year-old company for six years, said in an interview.

Campbell's reduced-sodium soups, launched during the current fiscal year, remain the most closely watched part of the company's product portfolio. The soups use sea salt that contains less sodium than standard food salt to reduce sodium without altering flavor.

"Third-quarter soup growth exceeded even the most optimistic forecasts, and the lower-sodium initiative has surpassed both internal and external expectations," Mitchell B. Pinheiro, an analyst with Janney Montgomery Scott L.L.C. in Center City, said in a note to investors.

A key measure for the reduced-sodium soups is "incrementality." This issue is whether regular purchasers of, for example, condensed chicken noodle soup simply switch to the new version, which has 25 percent less sodium per serving, or whether the reduced sodium attracts new consumers.

Campbell initially expected 25 percent of the reduced-sodium sales to be incremental. "Now, it's looking like it will be north of 45 percent," Conant said, cautioning that one should not read too much into such numbers in the first year of a product's life.

The company said its beverages, led by V8 vegetable juices, were its best-performing business so far this year.

The company said it boosted its marketing and other selling expenditures 18 percent in the third quarter to $336 million, mostly because of more U.S. advertising.

Also, its gross profit margin rose to 41.4 percent from 40.9 percent, as higher selling prices and increased productivity offset inflation for ingredients and other costs.

The Camden company's shares rose early in the day to as high as $40.87 on the news, but settled back in the afternoon to close unchanged at $39.50 on the New York Stock Exchange.