Campbell’s Beats Zacks Consensus

Campbell Soup Company (CPB: 33.19 0.00 0.00%) reported results for the second quarter of fiscal 2010 with earnings of 74 cents per share, well above the Zacks Consensus Estimate of 52 cents. Quarterly earnings were up 15.6% year-over-year.

Net sales for the quarter increased marginally by 1.5% year-over-year to $2.2 billion, attributable to a 2% decline in volume and mix and a 2% decline from increased promotional spending, which was partially offset by 4% favorable currency translation and 1% gain from price and sales allowances.

Sales of the U.S. Soup, Sauces and Beverages segment contracted 5% as sales of condensed soups were flat year-over-year, while ready-to-serve soups declined 18%. However, Swanson broth sales grew 1%.

Sales of the Baking and Snacking segment increased 11%, primarily due to strong sales of Pepperidge Farm biscuits, continued growth in the cookies and crackers business, especially Goldfish snack crackers. In Australia, the growth was strong driven by favorable currency translation and continued growth in Arnott’s.

In the International Soups and Sauces business, sales grew 12% due to increased sales in Europe, driven by positive currency translation and higher sales in Belgium and France, partially offset by lower sales in Germany. Sales also increased in Asia-Pacific due to favorable currency translation and gains in Japan. Favorable currency translations in Canada also contributed to a positive top line.

Gross margin for the quarter expanded 101 basis points (bps) to 40.5% versus 39.4% in the prior-year quarter. The increase in gross margin was primarily due to productivity improvements, which was partially offset by promotional spending and cost inflation.

For the first six months of 2010, cash and cash equivalents were $113 million. The company has a debt-to-capitalization ratio of 60.4%. Year-to-date, the company repurchased 7 million shares worth $213 million.

Concurrent with the earnings release, management lowered its guidance for fiscal 2010. Revenue growth in now expected to be in the range of 2.5% to 3.5%. Previous guidance was in the range of 4% to 5%.

However, guidance for annual earnings is reiterated in the range of 6% to 7%. Adjusted earnings growth is expected in the range of 9% to 11%. The guidance includes the impact of currency translation. The company expects favorable currency translations of 3% to 4% for the full year.