UPDATE 3-Campbell warns on full-year profit, shares fall

* Q1 EPS ex-items $0.77 vs Wall St view $0.76

* Sales up 3 percent to $2.25 billion

* Forex to hurt 2009 sales, EPS growth

* Shares down 8 pct (Recasts first sentence, adds analyst comment, updates share price)

By Aarthi Sivaraman

NEW YORK, Nov 24 (Reuters) - Campbell Soup Co CPB.N warned on Monday that a stronger U.S. dollar would hurt full-year earnings, sending shares down 8 percent after the foodmaker's quarterly profit beat Wall Street expectations by a penny.

Campbell and other leading foodmakers have benefited as a contracting U.S. economy forces more consumers to stay at home and prepare more of their own meals. Food companies have also managed to raise prices for their products to offset higher commodity costs.

But Campbell said that a stronger dollar, which lowers the value of sales overseas, would reduce fiscal 2009 sales and earnings growth rates by about 5 percentage points each.

The world’s largest soup maker derives about 25 to 30 percent of its sales from outside the United States.

Campbell shares were down $2.90 or 8 percent at $33.37, off an earlier low at $33.02, on the New York Stock Exchange on Monday afternoon.

Stifel Nicolaus analyst Christopher Growe said there may still be some downside to Campbell’s stock, which touched a year high of $40.85 on Oct. 1, as food stocks were seen as a safer bet amid growing economic worries.

The growth in Campbell’s U.S. soup sales, though strong, had come against easy comparisons and produced relatively little in terms of profit growth during the quarter, Growe noted. The reduction in Campbell’s fiscal 2009 outlook was not a big surprise, he said.


Campbell posted a net profit of $260 million, or 71 cents a share in the first quarter ended Nov. 2, compared with $270 million, or 70 cents a share, a year earlier.

Excluding an unrealized loss on commodity hedges and costs tied to restructuring, the company earned 77 cents a share, beating analysts’ average forecast of 76 cents a share, according to Reuters Estimates.

Total sales for Campbell, known for its namesake soups, and other brands such as Prego pasta sauce and Pepperidge Farm cookies, rose 3 percent to $2.25 billion.

Total U.S. soup sales rose 12 percent, with condensed soup sales -- to which consumers add water -- rising 14 percent. Condensed soups are more profitable for Campbell than ready-to-serve soups.

Campbell, which competes with General Mills Inc's GIS.N Progresso brand and others in the soup aisle, has introduced several new products over the past year. They include the Select Harvest label of soups that emphasize ingredients like farm-grown vegetables and "wholesome grains" to attract consumers seeking healthy food options.

Chief Executive Douglas Conant said in a statement that he was “encouraged” by the early results for its Select Harvest and V8 ready-to-serve soups.

In September, Campbell had said it expected 2009 sales to grow more than its 3 to 4 percent target excluding the impact of one fewer week in the fiscal year and divestitures.

It had forecast an adjusted earnings increase of 5 to 7 percent from a base of $2.09 a share, a forecast that equals about $2.19 to $2.23 a share.

Analysts, on average, expected it to earn $2.21 per share. (Additional reporting by Brad Dorfman; editing by Dave Zimmerman and Matthew Lewis)