Campbell Soup will struggle to justify the 50% jump in shares this year

It is a consomme devoutly to be wished: a soup that piques American appetites as successfully as snacks do. Otherwise, Campbell Soup will struggle to justify the chunky 50 per cent jump in shares this year. The $14 billion canned food company reported lukewarm results yesterday. While sales from its snacks unit, which include Pepperidge Farm Goldfish crackers and Kettle potato chips rose, results were decidedly weak in its struggling soup business… For all its woes, the division that includes soup still accounted for more than 50 per cent of Campbell’s sales last fiscal year. Hence the plan, announced earlier this summer, to invest $70 million in Campbell’s soup business over three years… Meanwhile, a deal to buy the pretzel company Snyder’s-Lance last year mean Campbell’s debt pile sits at $8 billion. Almost 5 times ebitda — the highest among peers. All this makes Campbell’s valuation unappetising. The stock is trading at a forward multiple of 19 times, pricing in a recovery in earnings. A yield of 3 per cent may tempt some. But all that debt means a cut to the payout is possible if sales disappoint. Rivals Kellogg and General Mills have lower leverage and higher yields. They make a more appealing dish for income-hungry investors.