Shares in Campbell Soup Co. bubbled on Friday when the company’s announced its Q4 results and fiscal 2020 guidance – but CEO Mark Clouse remains watchful. And rightly so.

In June, Campbell Soup Co. announced the financial results for the first nine months of its financial year – and shares in the US food group rose.

On Friday, the soup and snacks maker published numbers for its fourth quarter and for the year as a whole – and its share price jumped by more than 8% as the market reacted positively to quarterly earnings that beat expectations and to an outlook for the new 2020 financial year that was rosier than some on Wall Street believed they would get.

At the time of writing, Campbell’s shares are up almost 40%. In part, the leap is a reflection of how the market views the company, now it has resolved last summer’s proxy battle with activist investor Third Point and now it has implemented the results of the strategic review announced last August (which has involved selling assets making up circa a quarter of the business).

There are, meanwhile, some Campbell watchers who believe the company, away from strategic action to reshape and refocus the business, is also improving the performance of its remaining assets.

But other analysts indicate perhaps it is a little early to call a complete recovery – and that caution is prudent, given the make-up of the new-look Campbell and the categories in which the company operates.

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The company now comprises two divisions – snacks and a combined meals and beverages unit. Snacks accounts for roughly 47% of sales and meals and beverages (a division, incidentally, that is also home to the Plum Organics baby-food business) the remainder. At the centre of the meals and beverages division is soup, the product for which Campbell is best known and the product that has been one of the company’s most significant problems in recent years.

Announcing Campbell’s results on Friday, Mark Clouse, the company’s president and CEO, said the group’s fourth-quarter numbers had “culminated a year of steady, positive performance for Campbell”, adding: “We delivered consistent results and met or exceeded expectations for four consecutive quarters this year. We made significant progress against our 2019 strategic initiatives, namely: improving our in-market performance; over-delivering our cost savings programs; strengthening our relationships with key retailers; focusing the portfolio on our two core businesses in North America; and, completing the divestiture of Campbell Fresh and announcing the divestiture of Campbell International. We have created a solid foundation to build upon in fiscal 2020.”

The disposals continued this week, with Campbell announcing another sale, offloading its European snack assets to Ireland’s Valeo Foods Group. All told, the disposals will improve Campbell’s balance sheet, reducing the company’s debt pile, which soared in the wake of its 2017 acquisition of US snacks major Snyder’s-Lance.

Reporting on the fourth-quarter performance of Campbell’s remaining businesses, Clouse said the three-month period was “the first quarter we delivered top-line, gross margin and EPS growth in the year” and was “definitely a great way to finish”.

The Campbell boss, who was appointed just before Christmas, has pushed on with the new business strategy the company had set out last summer. The fourth quarter, he said, had been “the best quarter we have delivered in terms of performance versus prior year and provide some encouragement for the potential of our new focused portfolio, demonstrating what the business is capable of delivering”.

Clouse pointed to a 4% rise in sales from Campbell’s snacks business on an organic sales, with “contributions coming from across the business”. He cited “progress” on gross margin and another $45m in cost savings during the quarter.

Sales from Campbell’s US soup business, for so long something of a problem child for the company, grew 3%, with gains from its condensed and ready-to-serve products.

The soup sales helped the wider meals and beverage business grow, with sales from the division up 1%, a result that “encouraged” Clouse, although he reiterated comments he made at the company’s investor day in June when he said that part of Campbell’s reshaped empire had work to do.

“We still expect some volatility as we invest in the business and also make important choices to strengthen the portfolio for the future,” Clouse said.

In the round, while Campbell’s shares jumped in the wake of the results – and fiscal 2020 guidance – being published, analysts monitoring the company, while welcoming some positive signs from the business, remained watchful. 

Michael Lavery, a principal and senior research analyst at US investment bank Piper Jaffray, upgraded his rating on Campbell’s shares to ‘neutral’ from ‘underweight’.

“We believe better focus and reinvestment in key brands can drive long-term benefits for Campbell, but we recognise that rejuvenating brands that have been under-resourced can take some time,” Lavery said, according to US financial weekly Barron’s.

“Given its current momentum, additional investments look much more manageable than we had feared they might, helped in part by better current top-line trends. It is still relatively early days for management’s strategic plan.”

Erin Lash, director for consumer equity research at Morningstar, said on Friday Campbell had ended the financial year on “firmer footing”. However, she added: “The market seems to be warming to Campbell’s strategic agenda, but we think shares are a bit heated.

“We acknowledge the merits of its strategic pursuit, now anchored in driving profitable growth across its core meals, beverages, and snacking niches (as opposed to its prior bent of starving its brands of investment in favour of profit gains and placing an outsize reliance on inorganic growth opportunities) but don’t posit the trajectory will continue northward.

“Rather, we still view other branded peers, smaller niche manufacturers, and lower-priced private-label fare as formidable foes and believe enhanced levels of investment will be necessary as it works to better align its mix with evolving consumer trends.”

At Sanford Bernstein, long-standing US food industry analyst Alexia Howard said Campbell’s fourth-quarter results were “generally stronger than expected” and said the company’s guidance for fiscal 2020 was “largely in-line” but pointed to “easy comps” and asked: “How much visibility is there?”

She added: “Overall, while the results for the quarter were solid relative to consensus estimates, the fact that soup grew by 3% year-on-year needs to be considered in the context of the 14% decline in the year-ago period and the likely uncertainty that remains. Meanwhile, management noted at several points on the call that the intention is to step up merchandising activity as we enter this soup season, but also commented that distribution is still being trimmed, particularly in the tail of condensed soups.

“And although the first quarter also presents a fairly easy -6% growth comparable for soup (and -5% in meals and beverages) in the year-ago period, management still noted that it expects stronger performance in the back half of the year. As such, it will be important to monitor how consumer takeaway evolves as we enter this soup season – both in terms of volume and pricing dynamics.”

In fairness to Clouse, talking to analysts on Friday, he described Campbell’s results as “a critical first step in our journey to sustainable, profitable growth”. He acknowledged the company had to continue to work to “strengthen our businesses, improve our marketing and innovation, and demonstrate executional excellence consistently”, underlining how “by no means are we declaring victory”.

It is a pragmatic take on a business that has endured a challenging few years, has undergone significant restructuring and which is doing battle in some tough parts of the aisle.