Campbell Soup (NASDAQ: CPB) is one of the most well-known food product firms in the United States but it definitely isn’t stock on the tip of everyone's tongue in a market dominated by technology and AI.

However, the company has quietly been having a good 2024, providing a total return above 17%. That’s nearly in line with the S&P 500 and outperforming the large-cap consumer staples sector. The Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) has returned around 15%.

The company has been moderately beating its earnings estimates throughout the year; however, a decline in snack sales last quarter caused shares to fall despite a 7% earnings surprise.

Let’s look at Campbell’s operating segments in detail. I’ll then analyze trends in its financials before diving into its most recent results, reported on Aug. 29.

Campbell's Competitive Edge: How It Outpaced Rivals Recently

Campbell operates as two reportable segments: Meals & Beverages and Snacks. Meals & Beverages includes the company’s Campbell ready-to-eat soups, Swanson broths and stocks, Prego tomato sauce, Pace Mexican salsa, and V8 juices.

The Snacks segment includes Pepperidge Farm snacks like Goldfish crackers and various other potato chip and pretzel brands. The sales between these two segments were relatively even in 2023, with Meals & Beverages making up 52% of total sales to Snacks' 48%.

The firm's five largest customers made up 47% of sales in 2023, with the largest customer, Walmart, making up 22%. Of the company’s income before taxes (EBT), 98% came from the United States.

Over the past two years, revenue growth has slowed significantly, becoming negative before recovering to 6% in fiscal Q3. However, this was due to the company’s acquisition of Sovo’s brands. Without the added sales from Sovo, revenues were flat.

Still, organic growth was superior to peers, most of whom saw revenues decline. The company’s margins are basically right in the middle of the pack compared to large-cap U.S. food products companies.

Campbell’s Earnings Fall Short, but Rao’s Sauce Is a Bright Spot

Campbell's shares were down 2% on the day of its fiscal Q4 2024 earnings release. Its adjusted earnings per share (EPS) of $0.63 was an increase of 26% from the previous year but a decline of 16% from fiscal Q3. Adjusted EPS came in one cent higher than expected.

Revenue of $2.29 billion was an increase of 11% from the prior year, but a decrease of 3% from the prior quarter. It came in $20 million below expectations. Campbell issued full-year fiscal 2025 adjusted EPS guidance that was lower than analysts had hoped, but sales growth guidance was higher than expected.

A good thing to see was the recovery in margins for Campbell’s snacks segment. Last quarter, the 2% decrease in sales and the 7% decrease in operating margin for snacks weighed shares down, despite the company beating on earnings. This quarter, sales dropped by 3%, but the operating margin in snacks increased by 1%.

We should also examine the performance of products the company acquired through its purchase of Sovos. Overall, the acquisition is really what kept the company growing in the quarter. Although revenues grew 11%, they would have declined 1% had it not been for Sovos. Sovos Brand’s performance has been above expectations, according to Campbell.

Sovo’s principal product is Rao’s Italian sauce. It grew 19% in the quarter, the fastest-growing product highlighted by the firm. Rao’s is the #1 brand in the Italian sauce category in terms of dollar consumption and continues to grow faster than its category.

Campbell believes this growth can continue in the long term as the brand is extremely popular among millennials. The age group buys Rao’s at a rate 2.8 times faster than its category. Campbell believes there is a significant untapped market for Rao’s. Currently, the brand’s household penetration is only half of its Prego sauce.

Rao’s Could Be the Secret Sauce to Outperformance

The company’s expected adjusted earnings per share growth rate over the next three years sits slightly above its industry's median.

Given its recent outperformance and the addition of Sovos to boost sales, it’s not crazy to think it could exceed these estimates.

That’s especially true, given Rao’s Sauces' leading position and the brand’s opportunity for growth.

It currently sits right in the middle of the pack in terms of valuation compared to peers, with a forward price-to-earnings ratio of 15.6x.

The company also offers a healthy dividend yield of 3%.