Campbell Soup Co: $CPB Cash Flow Valuation Update

Current Price: ~ $42/share
Yield: ~ 2.13%


Campbell Soup Co manufactures & sells branded convenience food products. Its five segments are: U.S. Simple Meals, Global Baking & Snacking, International Simple Meals & Beverages, U.S. Beverages & Bolthouse and Foodservice.

          

Estimated WACC for the firm today is 6.63% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2004	456
2005	658
2006	917
2007	340
2008	468
2009	821
2010	742
2011	870
2012	797
2013	683

Average Annual Growth FCF: ~ 13%

CAGR FCF: ~ 4.6%

Consensus Forecast Industry 5-Year Growth: ~ 14% per year

Consensus Forecast Company 5-Year Growth: ~ 6% per year

Internal Growth Rate: ~ 4%

Sustainable Growth Rate: ~ 35%

Scenario 1

• Start at $683 million FCF
• Assume a 5-year growth rate in FCF of 6% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	683
1	724
2	767
3	813
4	862
5	914
Terminal Value	14616

The firm's future free cash flows, discounted at a WACC of 6.63%, give a present value for the entire firm (Debt + Equity) of $13959 million. If the firm's fair value of debt is estimated at $3299 million, then the fair value of the firm's equity could be $10660 million.  $10660 million / 314 million outstanding shares is approximately $34 per share and a 20% margin of safety is $27/share.

Scenario 2
All else being equal,

• Assume a 5-year growth rate in FCF of 9.5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	683
1	748
2	819
3	897
4	982
5	1075
Terminal Value	17761

• Present Value of the entire firm (Debt + Equity): $16586 million
• Value of Equity: $13287 million or $42/share
• 20% margin of safety is $34/share

Sources

Morningstar.com

Yahoo! Finance

Campbell Soup Company

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Campbell Soup Co: $CPB Cash Flow Valuation Update

Current Price: ~ $37/share
Yield: ~ 3.17%


With a heritage that dates back about 140 years, Campbell Soup is now a leading global manufacturer and marketer of branded convenience food products, most notably soup. However, the firm's product assortment spans beyond soup, as its portfolio of well-known brands includes Campbell's, Pace, Prego, Swanson, V8, and Pepperidge Farm. International operations account for around 30% of Campbell's consolidated sales.     

Estimated WACC for the firm today is 4.25% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2003	590
2004	456
2005	658
2006	917
2007	340
2008	468
2009	821
2010	742
2011	870
2012	797

Average Annual Growth FCF: ~ 12%

CAGR FCF: ~ 3%

Consensus Forecast Industry 5-Year Growth: ~ 14% per year

Consensus Forecast Company 5-Year Growth: ~ 5% per year

Internal Growth Rate: ~ 6%

Scenario 1
Average the high and low FCF of the past 5 years; Average FCF (2011, 2008) is $669 million

• Start at $669 million FCF
• Assume a 5-year growth rate in FCF of 3% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	669
1	689
2	710
3	731
4	753
5	776
Terminal Value	18799

The firm's future free cash flows, discounted at a WACC of 4.25%, give a present value for the entire firm (Debt + Equity) of $18494 million. If the firm's fair value of debt is estimated at $2663 million, then the fair value of the firm's equity could be $15831 million.  $15831 million / 314 million outstanding shares is approximately $50 per share and a 20% margin of safety is $40/share.

Scenario 2
Average FCF (2012, 2011, 2010) is $803 million

• Start at $803 million FCF
• Assume a higher WACC of 6.25%
• Assume a 5-year growth rate in FCF of 5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	803
1	843
2	885
3	930
4	976
5	1025
Terminal Value	17218

All else being equal,

• Present Value of the entire firm (Debt + Equity): $16591 million
• Value of Equity: $13928 million or $44/share
• 20% margin of safety is $35/share

Sources

Morningstar.com

Yahoo! Finance

Campbellsoupcompany.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Campbell Soup Co: $CPB cash flow valuation update

Current Price: ~ $32/share
Projected Yield: ~ 3.54%

With a heritage that dates back about 140 years, Campbell Soup is now a leading global manufacturer and marketer of branded convenience food products, most notably soup. However, the firm's product assortment spans beyond soup, as its portfolio of well-known brands includes Campbell's, Pace, Prego, Swanson, V8, and Pepperidge Farm. International operations account for around 30% of Campbell's consolidated sales.  

I estimated the firm's WACC today at 4.49% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year	FCF $Millions
2002	748
2003	590
2004	456
2005	658
2006	917
2007	340
2008	468
2009	821
2010	742
2011	870

Average Annual Growth FCF: ~ 11%

CAGR FCF: ~ 2%

Consensus Forecast Industry 5-Year Growth: ~ 14% per year

Consensus Forecast Company 5-Year Growth: ~ 5% per year

Scenario 1

Starting at $870 million FCF, assuming the company achieves a 5-year growth rate in FCF of 5% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	870
1	914
2	959
3	1007
4	1057
5	1110
Terminal Value	25940

The firm's future cash flows, discounted at a WACC of 4.49%, give a present value for the entire firm (Debt + Equity) of $25235 million. If the firm's fair value of debt is estimated at $3300 million, then the fair value of the firm's equity could be $21935 million.  $21935 million / 319 million outstanding shares is approximately $69 per share and a 20% margin of safety is $55/share.

Scenario 2

All else being equal, discount the future cash flows at a firm WACC of 7.00%:

Discounted Cash Flow Valuation

Year	FCF $Millions
0	870
1	914
2	959
3	1007
4	1057
5	1110
Terminal Value	16655

The firm's future cash flows, discounted at a WACC of 7.00%, give a present value for the entire firm (Debt + Equity) of $15987 million. If the firm's fair value of debt is estimated at $3300 million, then the fair value of the firm's equity could be $12687 million.  $12687 million / 319 million outstanding shares is approximately $40 per share and a 20% margin of safety is $32/share.

Sources

Morningstar.com

Yahoo! Finance

Campbellsoupcompany.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.