Campbell Soup Still Too Hot
Although Campbell's stock, which has posted year-to-date gains of "only" 17%, lags behind Hormel's
Even so, as with Hormel, which I also consider expensive, I don't believe it makes sense to bid up Campbell's shares while hoping that the Street has pegged this story correctly. But my issue is not just with Campbell's valuation.
Given the better-than-expected results I've seen from Kraft
If you've been following this sector as long as I have, you'll realize that there is nothing analysts enjoy scrutinizing more than "organic growth," or the metric that measures a company's operational performance using only internal resources and excluding events like acquisitions.
As with, say, ConAgra Foods
After posting 1% organic growth in its fiscal fourth quarter ended in August, organic revenue declined 4% last quarter, a gross underperformance against Hormel and Kraft, two companies that trade at much lower multiples.
I appreciate that there were factors outside of management's control that contributed to the dismal results. These include retail inventory movements resulting from the Thanksgiving holiday arriving later than usual, due to the whims of the calendar. That was also the case for Kraft. And when ConAgra reports earnings in a few weeks, we should get a better sense of how real of an adversity the timing of Thanksgiving was.