CPB - Valens Credit Report - 2022 01 21
Credit markets are understating credit risk, with a cash bond YTW of 1.760% and CDS of 51bps relative to an Intrinsic YTW of 3.100%, and an Intrinsic CDS of 190bps. Meanwhile, Moody's is materially understating CPB's fundamental credit risk with its Baa2 credit rating six notches higher than Valens' HY2 (B2) credit rating.Earnings Call Forensics™ analysis of the firm's Q1 2022 earnings call highlights that management may lack confidence in their ability to sustain effective pricing execution, maintain consistent brand share gains and Prego market leadership, and improve operating income for Snacks. Management may also have concerns about the sustainability of end-market canned goods demand and the impact of competitive, inflationary, and labor pressures on their business. Moreover, they may lack confidence in their ability to drive margin improvements, limit advertising and consumer promotion expenses, and manage capex investments. Finally, they may have concerns about the continued lapping of retailer inventory replenishment, and they may lack confidence in their ability to build sufficient soup capacity.
Campbell Soup is a manufacturer and marketer of food and beverage products. The company's reportable segments are: Meals and Beverages, which includes the retail and foodservice businesses in the United States and Canada, and the meals and shelf-stable beverages business in Latin America; Snacks, which consists of Pepperidge Farm cookies, crackers, fresh bakery and frozen products in United States retail, including Milano cookies and Goldfish crackers, and Snyder's of Hanover pretzels, Lance sandwich crackers, Cape Cod and Kettle Brand potato chips, Late July snacks, Snack Factory Pretzel Crisps, Pop Secret popcorn, Emerald nuts, and other snacking products in the United States and Canada.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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