Cooling Campbell's Soup hopes to warm up overseas

October 28, 2007|By Andrew Leckey | Andrew Leckey,Tribune Media Services

I expected big results from my shares of Campbell Soup Co. Why haven't they done better this year?

- F.C., via the Internet

The world's largest soup maker has seen sales of that product cool off a bit lately, while its marketing and selling costs have risen.

A decline in sales of its ready-to-serve soups has weighed on the stock price. In addition, competitor General Mills launched Progresso microwave soups that could threaten Campbell's longtime leadership in that category.

Campbell Soup shares (CPB) are down 6 percent this year, after last year's 31 percent increase. Meanwhile, its broths and products such as V8 juices, Prego pasta sauce, Pace salsa and Pepperidge Farm bread have enjoyed sales gains.

To focus more on basic meal products, Campbell Soup has put its Godiva Chocolatier brand up for sale. Swiss chocolate-maker Lindt & Spruengli has acknowledged it is exploring a bid for Godiva. The business could sell for more than $1 billion.

Campbell Soup earnings increased 39 percent in the fiscal fourth quarter that ended July 29, though results a year earlier were depressed by costs associated with the sale of some operations. The quarterly dividend was recently increased 10 percent per share.

It is initiating major product launches in China and Russia after careful studies of habits and tastes of consumers in both nations. International sales, including its existing leadership position in Europe, are expected to play a significant role in the firm's growth.

In China, it is teaming with Swire beverages, the Coca-Cola bottler there, to distribute its broth products. In Russia, it is emphasizing lighter packaging and heartier soups.

Consensus rating on shares of Campbell Soup is between "buy" and "hold," according to Thomson Financial. That consists of five "strong buys," four "buys," and nine "holds."

Members of the Dorrance family, direct descendants of condensed-soup inventor John Dorrance, own more than 40 percent of Campbell Soup, but they leave management to professionals.

The company recently realigned management, naming Denise Morrison president of its North America soup and beverages businesses. Either Morrison or Larry McWilliams, president of Campbell International, could be next in the line to someday replace 56-year-old chief executive Douglas Conant.

Earnings are expected to rise 8 percent for its fiscal year ending in July and 10 percent the following fiscal year. The five-year annualized return is projected to be 7 percent, versus 9 percent expected for the processed and packaged goods industry.

If I give stock to my son, how much can I give him under the gift laws, and what would be his cost basis? Is the value of the gift based on the stock price at the time of the gift?

- R.S., Monee, Ill.

The annual gift tax exclusion for 2007 is $12,000. If the donor is married, and the spouse agrees to gift splitting, the donor can double that. Amounts beyond the annual exclusion are classified as taxable gifts. But you don't have to actually pay any tax until they cumulatively exceed a $1 billion lifetime exclusion.

You must next consider the value of the stock.

"For gift tax purposes, the value of the gifted stock is based on the fair market value at the time you give it as a gift," said Maggie Doedtman, manager of tax training at H&R Block, Kansas City, Mo. "However, the cost basis [for potential capital gains] is the same as the parent's cost basis, which is what the stock was bought for plus any dividends reinvested."

You'll need to file IRS gift tax Form 709 if you exceed the annual exclusion, though, again, that doesn't mean you will necessarily need to pay gift tax, Doedtman said.

Is Vanguard Capital Value Fund worth owning? It was recommended.

-M.R., via the Internet

Portfolio manager David Fassnacht is a big-time talent who also has been running two-thirds of the giant Vanguard Windsor Fund since 2004.

He has been on his own as the lead manager of this smaller fund since then as well, backed by the experienced team of analysts at Wellington Management.

Both funds emphasize a deep-value strategy, rely on opportunistic stock picks and have low expenses. But the smaller fund can be a bit more agile in snapping up under priced smaller-cap stocks.

The $670 million Vanguard Capital Value Fund (VCVLX) is up 10 percent over the past 12 months and 14 percent for the three-year annualized period. Both rank in the top one-third of large value funds.

"The manager and his team roam all over the stock market, regardless of market capitalization or style boundaries, looking for stocks they think are trading at significant discounts to their value," said Dan Culloton, analyst with Morningstar Inc. in Chicago. "I do like its eclecticism and patience, though it can look out of step every now and then."

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