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The J.M. Smucker (SJM) Queued for Q4 Earnings: Things to Note

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The J. M. Smucker Company (SJM - Free Report) is likely to witness a decline in the top and bottom lines when it reports fourth-quarter fiscal 2021 numbers on Jun 3. The Zacks Consensus Estimate for revenues is pegged at $1,874 million, suggesting a decline of 10.4% from the prior-year quarter’s reported figure. In the last reported quarter, the company witnessed a 5% increase in revenues.

The Zacks Consensus Estimate for earnings has declined a penny over the past seven days to $1.67 per share, which suggests a slump of 35% from the figure reported in the prior-year period. The company has a trailing four-quarter earnings surprise of 17.7%, on average. In the last reported quarter, The J. M. Smucker posted an earnings surprise of 10.4%.

The J. M. Smucker Company Price, Consensus and EPS Surprise

The J. M. Smucker Company Price, Consensus and EPS Surprise

The J. M. Smucker Company price-consensus-eps-surprise-chart | The J. M. Smucker Company Quote

Key Factors to Note

In the last earnings call, although The J. M. Smucker raised its earnings and sales view for fiscal 2021, it projected a year-over-year decline in these metrics in the fourth quarter. Sales in the fourth quarter of fiscal 2021 are anticipated to have tumbled 10%, including the lapping of $185 million worth of pandemic-related additional sales recorded in the fourth quarter of fiscal 2020. The company expects lower net sales, gross margin contraction, additional marketing investments, and the net impact of divestitures and share buybacks to affect earnings per share in the fourth quarter.

We note that increased stay-at-home trends have been dealing a blow to The J.M. Smucker’s Away From Home business. This was evident in the third quarter of fiscal 2021, wherein softness in the Away From Home division and Crisco’s divestiture weighed on the company’s International and Away From Home segment. Further, The J. M. Smucker’s selling, distribution and administrative (SD&A) expenses have been increasing year over year for a while. Management expects a 3-4% rise in SD&A expenses in fiscal 2021, mainly due to elevated marketing expenditure and incentive compensation. These aspects raise concerns over the quarter under review.

We note that The J. M. Smucker increased its marketing investments for the second half of fiscal 2021, including mass media, digital engagement, e-commerce as well as click and collect programs. In the fourth quarter, management expects additional trade spend investments, especially for the pet business.

Nevertheless, The J. M. Smucker’s retail businesses have been gaining on increased at-home consumption amid the pandemic, along with benefits from its consumer-centric strategy. Further, the company has been benefiting from its e-commerce channel, which in turn is seeing increased sales owing to higher online shopping due to the pandemic. Apart from these, The J.M. Smucker’s key partnerships with a few coffee companies are noteworthy.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for The J. M. Smucker this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The J. M. Smucker currently has a Zacks Rank #3 but an Earnings ESP of -2.14%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Chewy (CHWY - Free Report) has an Earnings ESP of +133.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup (CPB - Free Report) has an Earnings ESP of +2.05% and a Zacks Rank #3.

General Mills (GIS - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #3.

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