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The J.M. Smucker (SJM) Q3 Earnings Beat Estimates, Sales Down
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The J. M. Smucker Company (SJM - Free Report) posted third-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, earnings and sales declined year over year. The company is witnessing volatile environment thanks to cost inflation and supply chain disruptions. Management highlighted that it expects these challenges to continue in the fiscal fourth quarter.
Adjusted earnings of $2.33 per share declined 5% year over year. Nevertheless, the metric surpassed the Zacks Consensus Estimate of $2.08.
Net sales amounted to $2,057.1 million, which beat the consensus mark of $2,052.1 million. The top line inched down 1% year over year. Excluding non-comparable net sales related to divestitures as well as favorable currency movements, net sales increased 4%. The uptick in comparable net sales can be attributed to positive net price realization for the U.S. Retail segments as well as the International and Away From Home units. This was offset by a lower contribution from volume/mix.
Adjusted gross profit fell 8% to $712.3 million. Adjusted gross profit margin declined to 34.6% from 37.3% reported in the year-ago quarter. Adjusted operating income dropped 6% to $377.9 million. Adjusted operating margin came in at 18.4%, down from 19.4% reported in the year-ago quarter.
Segment Performance
U.S. Retail Pet Foods: Segment sales fell 9% to $696.6 million. Excluding non-comparable net sales associated with the Natural Balance and private label dry pet food businesses divestiture, the metric inched down 1%. Volume/mix had a 7-percentage point negative impact and net price realization contributed 6 percentage points to net sales. Segment profit slumped 29% to $95.7 million.
U.S. Retail Coffee: Net sales increased 6% to $661.8 million. Volume/mix had a 1-percentage point negative impact and net price realization contributed 7 percentage points to net sales. Segment profit moved up 1% to $213.4 million.
U.S. Retail Consumer Foods: Sales in the segment fell 3% to $433.1 million. Excluding the impact of the divested Crisco business, net sales jumped 4%. Net price realization contributed 7 percentage points to sales. Volume/mix hurt net sales by 2 percentage point. Segment profit declined 10% to $99.5 million.
International and Away From Home: Net sales advanced 13% to $265.6 million. Excluding the impact of the Crisco divestment, as well as positive impacts from currency movements, net sales escalated 14%. Comparable net sales increases for the Away from Home and International operating segments were 29% and 1%, respectively. Both volume/mix and net price realization had positive impacts on segment net sales. Segment profit increased 40% to $34.2 million.
Financials
The J. M. Smucker exited the quarter with cash and cash equivalents of $284.3 million, long-term debt (less current portion) of $4,309.7 million and total shareholders’ equity of $8,266.9 million. The company’s net debt repayments amounted to $226.1 million during the reported quarter.
Cash flow from operating activities amounted to $439.7 million for the three-month period ended Jan 31, 2022. Free cash flow was $322.4 million in the quarter. Free cash flow is expected to be $700 million, while capital expenditures are likely to be $400 million in fiscal 2022.
Image Source: Zacks Investment Research
Fiscal 2022 Guidance
The J. M. Smucker now anticipates net sales to be down 0.5%-1.5% year over year. The company had earlier anticipated fiscal 2022 net sales to be down 1% to flat year over year. The net sales view reflects an impact of $431.8 million associated with Crisco, Natural Balance, private label dry pet food and natural beverage and grains businesses divestiture. On a comparable basis, net sales are anticipated to improve nearly 4.5% at the mid-point of the net sales guidance. The view reflects a deceleration in at-home consumption trends, which more than offsets increased net pricing across a number of categories, continued double-digit net sales growth for the Smucker's Uncrustables brand as well as a rebound in away from home channels.
Adjusted EPS for fiscal 2022 are now envisioned in the range of $8.35-$8.65 compared with $8.35-$8.75 expected before. The bottom-line view takes into account the updated net sales view, adjusted gross profit margin of almost 35% along with SD&A expenses drop of nearly 10% year over year.
Shares of this Zacks Rank #4 (Sell) company have dipped 0.8% so far this year against the industry’s growth of 1.9%.
Looking for Better-Ranked Food Stocks? Check These
The Zacks Consensus Estimate for Tyson Foods’ current financial year sales suggests growth of 9.5% from the year-ago reported number. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
Pilgrim's Pride, the provider of frozen, fresh and value-added chicken products, currently carries a Zacks Rank #2 (Buy). Shares of Pilgrim's Pride have decreased 16.4% year-to-date.
The Zacks Consensus Estimate for Pilgrim's Pride current financial year EPS suggests growth of 16.2% from the year-ago reported number. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
Flowers Foods, which produces and markets packaged bakery products, carries a Zacks Rank #2. Shares of Flowers Foods have moved down 0.2% so far this year.
The Zacks Consensus Estimate for Flowers Foods' 2022 financial year EPS suggests growth of 3.2% from the year-ago reported number. FLO has a trailing four-quarter earnings surprise of 9%, on average.
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The J.M. Smucker (SJM) Q3 Earnings Beat Estimates, Sales Down
The J. M. Smucker Company (SJM - Free Report) posted third-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, earnings and sales declined year over year. The company is witnessing volatile environment thanks to cost inflation and supply chain disruptions. Management highlighted that it expects these challenges to continue in the fiscal fourth quarter.
The J. M. Smucker Company Price and EPS Surprise
The J. M. Smucker Company price-eps-surprise | The J. M. Smucker Company Quote
Quarter in Detail
Adjusted earnings of $2.33 per share declined 5% year over year. Nevertheless, the metric surpassed the Zacks Consensus Estimate of $2.08.
Net sales amounted to $2,057.1 million, which beat the consensus mark of $2,052.1 million. The top line inched down 1% year over year. Excluding non-comparable net sales related to divestitures as well as favorable currency movements, net sales increased 4%. The uptick in comparable net sales can be attributed to positive net price realization for the U.S. Retail segments as well as the International and Away From Home units. This was offset by a lower contribution from volume/mix.
Adjusted gross profit fell 8% to $712.3 million. Adjusted gross profit margin declined to 34.6% from 37.3% reported in the year-ago quarter. Adjusted operating income dropped 6% to $377.9 million. Adjusted operating margin came in at 18.4%, down from 19.4% reported in the year-ago quarter.
Segment Performance
U.S. Retail Pet Foods: Segment sales fell 9% to $696.6 million. Excluding non-comparable net sales associated with the Natural Balance and private label dry pet food businesses divestiture, the metric inched down 1%. Volume/mix had a 7-percentage point negative impact and net price realization contributed 6 percentage points to net sales. Segment profit slumped 29% to $95.7 million.
U.S. Retail Coffee: Net sales increased 6% to $661.8 million. Volume/mix had a 1-percentage point negative impact and net price realization contributed 7 percentage points to net sales. Segment profit moved up 1% to $213.4 million.
U.S. Retail Consumer Foods: Sales in the segment fell 3% to $433.1 million. Excluding the impact of the divested Crisco business, net sales jumped 4%. Net price realization contributed 7 percentage points to sales. Volume/mix hurt net sales by 2 percentage point. Segment profit declined 10% to $99.5 million.
International and Away From Home: Net sales advanced 13% to $265.6 million. Excluding the impact of the Crisco divestment, as well as positive impacts from currency movements, net sales escalated 14%. Comparable net sales increases for the Away from Home and International operating segments were 29% and 1%, respectively. Both volume/mix and net price realization had positive impacts on segment net sales. Segment profit increased 40% to $34.2 million.
Financials
The J. M. Smucker exited the quarter with cash and cash equivalents of $284.3 million, long-term debt (less current portion) of $4,309.7 million and total shareholders’ equity of $8,266.9 million. The company’s net debt repayments amounted to $226.1 million during the reported quarter.
Cash flow from operating activities amounted to $439.7 million for the three-month period ended Jan 31, 2022. Free cash flow was $322.4 million in the quarter. Free cash flow is expected to be $700 million, while capital expenditures are likely to be $400 million in fiscal 2022.
Image Source: Zacks Investment Research
Fiscal 2022 Guidance
The J. M. Smucker now anticipates net sales to be down 0.5%-1.5% year over year. The company had earlier anticipated fiscal 2022 net sales to be down 1% to flat year over year. The net sales view reflects an impact of $431.8 million associated with Crisco, Natural Balance, private label dry pet food and natural beverage and grains businesses divestiture. On a comparable basis, net sales are anticipated to improve nearly 4.5% at the mid-point of the net sales guidance. The view reflects a deceleration in at-home consumption trends, which more than offsets increased net pricing across a number of categories, continued double-digit net sales growth for the Smucker's Uncrustables brand as well as a rebound in away from home channels.
Adjusted EPS for fiscal 2022 are now envisioned in the range of $8.35-$8.65 compared with $8.35-$8.75 expected before. The bottom-line view takes into account the updated net sales view, adjusted gross profit margin of almost 35% along with SD&A expenses drop of nearly 10% year over year.
Shares of this Zacks Rank #4 (Sell) company have dipped 0.8% so far this year against the industry’s growth of 1.9%.
Looking for Better-Ranked Food Stocks? Check These
Some better-ranked stocks are Tyson Foods, Inc. (TSN - Free Report) , Pilgrim's Pride (PPC - Free Report) and Flowers Foods (FLO - Free Report) .
Tyson Foods, a meat provider, currently sports a Zacks Rank #1 (Strong Buy). Shares of Tyson Foods have increased 6.3% year-to-date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tyson Foods’ current financial year sales suggests growth of 9.5% from the year-ago reported number. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.
Pilgrim's Pride, the provider of frozen, fresh and value-added chicken products, currently carries a Zacks Rank #2 (Buy). Shares of Pilgrim's Pride have decreased 16.4% year-to-date.
The Zacks Consensus Estimate for Pilgrim's Pride current financial year EPS suggests growth of 16.2% from the year-ago reported number. PPC has a trailing four-quarter earnings surprise of 24.9%, on average.
Flowers Foods, which produces and markets packaged bakery products, carries a Zacks Rank #2. Shares of Flowers Foods have moved down 0.2% so far this year.
The Zacks Consensus Estimate for Flowers Foods' 2022 financial year EPS suggests growth of 3.2% from the year-ago reported number. FLO has a trailing four-quarter earnings surprise of 9%, on average.