Monday, May 24, 2010

Campbell Soup -- Strange Taste

Campbell Soup Company (CPB) released quarterly earnings headlining increased sales of 7%, increased margins and confirming EPS guidance for the year at the high end of 9-11%. Hey this sounds pretty good lets take a closer look.

Q3 net earnings after tax are down. Hey the story seems to be changing. Weighted average shares are down almost 4%, meaning the stock buyback is shrinking the share base. Consider comments about the company’s ongoing practice of buying back shares sufficient to offset those issued under incentive compensation plans. Starting to worry a little.

The earnings per share are the same as comparable quarter. You got to love a good financial engineer. The icing on the cake is the increased dividend.

So Douglas R. Conant, Campbell’s President and CEO, said, “We delivered another quarter of strong adjusted earnings growth."

The EPS growth is confirmed at the high side but Q3 results really are not impressive.

The soup tastes strange today.

Disclosure: No position in this stock