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Tickers in this Article: CPB, SLE, UN, UL, K
Shares of Campbell's (NYSE:CPB) took a slight tumble after the earnings release as many investors expected stronger sales and others were concerned about its outlook. Still others are worried about more challenging soup sale trends in the nearer term. Prospective investors should be more interested in the firm's outlook over the long haul, which isn't all that compelling. IN PICTURES: Learn To Invest In 10 Steps

Fourth Quarter Review
Sales fell a modest 1% to $1.5 billion as a one percentage point boost from positive currency fluctuations was offset by a 2 percentage point rise in promotional spending. By division, U.S. soup, sauce and beverage sales (42.4% of total quarterly sales) fell 1%, international sales of these products (18.5%) fell 3%, and baking and snacking (31.6%) grew 3%. North American Foodservice (7.5%) fell 7% and competes with similar divisions at archrivals Sara Lee (NYSE:SLE) and Unilever (NYSE:UN) (NYSE:UL).

Despite the slight compression in the top line, operating earnings improved more than 30% to $221 million as the international division posted a slight gain after a major loss in last year's quarter. The U.S. segment saw a slight compression in profits while the remaining two units logged modest improvements.

Lower taxes helped push net earnings ahead nearly 64% to $113 million, or 33 cents per diluted share. This beat analyst expectations for the quarter.

Full Year Recap
Full year sales eked out a 1% increase as mid single-digit growth in the baking and snacking and international divisions offset mid single-digit declines in the U.S. and North American foodservice units. Operating profit growth was again stronger, rising 13.7% to $1.5 billion as all four segments reported profit increases. Net earnings improved 14.7% to $844 million, or $2.42 per diluted share.

For the coming year, Campbell's said to expect sales growth between 2% and 3%, and earnings growth between 5% and 7% from an adjusted earnings level of $2.47 that excludes two cents in one-time charges and three cents related to charges from recent healthcare legislation. (For related reading, take a look at The One-Time Expense Warning.)

Bottom Line
Despite the tougher near-term trends, Campbell's still dominates the soup industry and has a market share estimated at over 80%. It is also impressively profitable, with net margins during the just-completed year at 11%. Unfortunately, it isn't growing very fast; sales over the past three-, five- and 10-year periods have grown around only 1% annually while net income growth has been even lower.

The forward P/E is still reasonable at 13.8 and there is downside protection given food sales are as recession-resistant as any product out there, but it's hard to see much upside in the stock from current levels. Food peer Kellogg (NYSE:K) has a similar forward P/E and has proven much more adept at leveraging single-digit sales growth into double-digit profit growth over the years.

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