Why Warren Buffett Might Buy Campbell Soup

Speculation that Campbell Soup may be Warren Buffett's next acquisition target is swirling around the financial media. Many observers believe that Berkshire Hathaway's joint acquisition of Heinz could lead to the acquisition of other branded food companies -- and there are many reasons why it could be Campbell Soup.

Campbell Soup has the consistency and durability of PepsiCoEveryone knows that PepsiCo is a great business, but few put Campbell Soup in the same league as the world's leading snacks company.

However, the evidence suggests just that. Campbell Soup may not have the global reach and worldwide name recognition that makes PepsiCo one of the world's most respected companies, but its financial performance suggests that there are many similarities between the two companies.

The following chart -- PepsiCo and Campbell Soup's operating margin for the last two decades -- illustrates the similarities.

Source: Mergent Online, author's calculation of adjusted operating margin (excludes one-time items)

The similarity between the two companies' operating margins through the years is striking. Both generate a remarkably stable operating profit from year to year and profitability has trended upward over the long term.

Source @ dailyfinance.com