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The J.M. Smucker (SJM) Rises on Q2 Earnings Beat & Raised View
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The J. M. Smucker Company (SJM - Free Report) posted second-quarter fiscal 2023 results, wherein sales and earnings came ahead of the Zacks Consensus Estimate and the former increased year over year. Organic sales increased across all businesses, backed by the company’s portfolio strength and efforts to manage cost inflation and supply-chain headwinds.
Based on a strong performance and continued business momentum, management pulled up its net sales and adjusted earnings per share (EPS) views for fiscal 2023. Shares of the company have risen more than 5% in the pre-market trading session on Nov 21.
Quarter in Detail
Adjusted earnings of $2.40 per share declined 1% year over year. However, the metric surpassed the Zacks Consensus Estimate of $2.19.
The J. M. Smucker Company Price, Consensus and EPS Surprise
Net sales amounted to $2,205 million, which beat the consensus mark of $2,161 million. The top line advanced 8% year over year.
Excluding non-comparable net sales related to divestitures and currency movements, net sales increased 11%. The uptick in comparable net sales can be attributed to the positive net price realization in all the company’s segments. This was partly offset by a lower volume/mix, especially in the U.S. Retail Coffee segment.
The gross profit dipped 1%, and the adjusted gross profit increased by $0.1 million. The lower gross profit was a result of higher commodity and ingredient, packaging, transportation and manufacturing costs, among other factors. These were partly compensated by improved net price realization.
Meanwhile, the adjusted operating income fell 2% due to the reduced gross profit and higher selling, distribution and administrative (SD&A) costs.
Segmental Performance
U.S. Retail Pet Foods: The segment’s sales jumped 9% to $765.2 million. Excluding non-comparable net sales associated with the private label dry pet food businesses’ divestiture, the metric rose 14%. The volume/mix had an adverse impact of 3%, made up by the net price realization, which had a favorable 16-percentage point impact on net sales. The segment’s profit jumped 21% to $120.1 million.
U.S. Retail Coffee: Net sales increased 10% to $709.8 million. The volume/mix had a 13-percentage point negative impact, and the net price realization boosted net sales by 23 percentage points. The segment’s profit moved down 10% to $187.7 million.
U.S. Retail Consumer Foods: Sales in the segment fell 2% to $432.2 million. Excluding the impact of the natural beverage and grain businesses’ divestiture, net sales ascended by 7%. The net price realization had a nine-percentage point positive impact on sales. The volume/mix reduced net sales by three percentage points. The segment’s profit tumbled 10% to $100.3 million.
International and Away From Home: Net sales advanced 14% to $297.9 million. Excluding the impact of the natural beverage and grain businesses’ divestiture, as well as the negative impacts of currency movements, net sales escalated by 17%.
Excluding the impact of divestitures and currency headwinds, net sales rose 19% for the Away from Home division and 15% for the International division. The volume/mix had a one-percentage-point negative effect, and the net price realization had a positive impact of 18 percentage points on overall net sales. The segment’s profit climbed 3% to $41.5 million.
Financials
The J. M. Smucker exited the quarter with cash and cash equivalents of $27.1 million, long-term debt of $4,312.4 million and total shareholders’ equity of $8,217.3 million.
Cash flow provided by operating activities amounted to $205 million for the three-month period ended Oct 31, 2022. Free cash flow was $102.9 million in the quarter. Net debt repayments amounted to $88.8 million for the quarter.
Free cash flow and capital expenditures are likely to be $550 million each in fiscal 2023.
Fiscal 2023 Guidance
Management stated that the ongoing cost inflation, a volatile supply chain and a broader macroeconomic landscape continue to affect the company’s results and cause risks for fiscal 2023. The recent product recall is expected to impact financial results.
However, The J.M. Smucker remains focused on actions like minimizing the impacts of cost inflation, product recall and other business hurdles. The company raised its net sales EPS guidance for fiscal 2023.
Incidentally, The J.M. Smucker recently initiated a voluntary recall of certain Jif peanut butter products made at its Lexington, KY facility and sold mainly in the United States. The move was a result of potential salmonella contamination.
For fiscal 2023, SJM anticipates net sales to rise 5.5-6.5% now, up from the previous view of 4%-5%. Excluding non-comparable sales related to the private label dry pet food and natural beverage and grain businesses’ divestitures, net sales are anticipated to improve nearly 8% at the midpoint of the net sales guidance compared with the 6.5% expected before.
The view reflects the positive impact of elevated net pricing to counter cost inflation in many categories, partly negated by an expected volume/mix effect of the price elasticity of demand and a 2% adverse impact related to the product recall.
The adjusted EPS for fiscal 2023 is envisioned in the $8.35-$8.75 band, up from the earlier $8.20-$8.60 band. The guidance includes an 80-cent impact of the product recall. The bottom-line view reflects the positive impact of pricing and share buybacks (of the prior year), more than negated by inflated costs, an expected volume/mix effect of the price elasticity of demand, an adverse impact of the product recall and elevated SD&A expenses.
The bottom-line view takes into account an adjusted gross profit margin of 33.5%. Also, the adjusted effective income tax rate is envisioned at 24.1%.
Shares of this Zacks Rank #2 (Buy) company have rallied 6.1% in the past three months compared to the industry’s dip of 0.1%.
Looking for Other Consumer Staple Stocks? Check These
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods, carries a Zacks Rank #2 at present. General Mills has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for GIS’ current financial-year sales suggests growth of 4.6% from the year-ago reported number.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and EPS suggests growth of 2.7% and around 3.8%, respectively, from the corresponding year-ago reported figures.
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The J.M. Smucker (SJM) Rises on Q2 Earnings Beat & Raised View
The J. M. Smucker Company (SJM - Free Report) posted second-quarter fiscal 2023 results, wherein sales and earnings came ahead of the Zacks Consensus Estimate and the former increased year over year. Organic sales increased across all businesses, backed by the company’s portfolio strength and efforts to manage cost inflation and supply-chain headwinds.
Based on a strong performance and continued business momentum, management pulled up its net sales and adjusted earnings per share (EPS) views for fiscal 2023. Shares of the company have risen more than 5% in the pre-market trading session on Nov 21.
Quarter in Detail
Adjusted earnings of $2.40 per share declined 1% year over year. However, the metric surpassed the Zacks Consensus Estimate of $2.19.
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
Net sales amounted to $2,205 million, which beat the consensus mark of $2,161 million. The top line advanced 8% year over year.
Excluding non-comparable net sales related to divestitures and currency movements, net sales increased 11%. The uptick in comparable net sales can be attributed to the positive net price realization in all the company’s segments. This was partly offset by a lower volume/mix, especially in the U.S. Retail Coffee segment.
The gross profit dipped 1%, and the adjusted gross profit increased by $0.1 million. The lower gross profit was a result of higher commodity and ingredient, packaging, transportation and manufacturing costs, among other factors. These were partly compensated by improved net price realization.
Meanwhile, the adjusted operating income fell 2% due to the reduced gross profit and higher selling, distribution and administrative (SD&A) costs.
Segmental Performance
U.S. Retail Pet Foods: The segment’s sales jumped 9% to $765.2 million. Excluding non-comparable net sales associated with the private label dry pet food businesses’ divestiture, the metric rose 14%. The volume/mix had an adverse impact of 3%, made up by the net price realization, which had a favorable 16-percentage point impact on net sales. The segment’s profit jumped 21% to $120.1 million.
U.S. Retail Coffee: Net sales increased 10% to $709.8 million. The volume/mix had a 13-percentage point negative impact, and the net price realization boosted net sales by 23 percentage points. The segment’s profit moved down 10% to $187.7 million.
U.S. Retail Consumer Foods: Sales in the segment fell 2% to $432.2 million. Excluding the impact of the natural beverage and grain businesses’ divestiture, net sales ascended by 7%. The net price realization had a nine-percentage point positive impact on sales. The volume/mix reduced net sales by three percentage points. The segment’s profit tumbled 10% to $100.3 million.
International and Away From Home: Net sales advanced 14% to $297.9 million. Excluding the impact of the natural beverage and grain businesses’ divestiture, as well as the negative impacts of currency movements, net sales escalated by 17%.
Excluding the impact of divestitures and currency headwinds, net sales rose 19% for the Away from Home division and 15% for the International division. The volume/mix had a one-percentage-point negative effect, and the net price realization had a positive impact of 18 percentage points on overall net sales. The segment’s profit climbed 3% to $41.5 million.
Financials
The J. M. Smucker exited the quarter with cash and cash equivalents of $27.1 million, long-term debt of $4,312.4 million and total shareholders’ equity of $8,217.3 million.
Cash flow provided by operating activities amounted to $205 million for the three-month period ended Oct 31, 2022. Free cash flow was $102.9 million in the quarter. Net debt repayments amounted to $88.8 million for the quarter.
Free cash flow and capital expenditures are likely to be $550 million each in fiscal 2023.
Fiscal 2023 Guidance
Management stated that the ongoing cost inflation, a volatile supply chain and a broader macroeconomic landscape continue to affect the company’s results and cause risks for fiscal 2023. The recent product recall is expected to impact financial results.
However, The J.M. Smucker remains focused on actions like minimizing the impacts of cost inflation, product recall and other business hurdles. The company raised its net sales EPS guidance for fiscal 2023.
Incidentally, The J.M. Smucker recently initiated a voluntary recall of certain Jif peanut butter products made at its Lexington, KY facility and sold mainly in the United States. The move was a result of potential salmonella contamination.
For fiscal 2023, SJM anticipates net sales to rise 5.5-6.5% now, up from the previous view of 4%-5%. Excluding non-comparable sales related to the private label dry pet food and natural beverage and grain businesses’ divestitures, net sales are anticipated to improve nearly 8% at the midpoint of the net sales guidance compared with the 6.5% expected before.
The view reflects the positive impact of elevated net pricing to counter cost inflation in many categories, partly negated by an expected volume/mix effect of the price elasticity of demand and a 2% adverse impact related to the product recall.
The adjusted EPS for fiscal 2023 is envisioned in the $8.35-$8.75 band, up from the earlier $8.20-$8.60 band. The guidance includes an 80-cent impact of the product recall. The bottom-line view reflects the positive impact of pricing and share buybacks (of the prior year), more than negated by inflated costs, an expected volume/mix effect of the price elasticity of demand, an adverse impact of the product recall and elevated SD&A expenses.
The bottom-line view takes into account an adjusted gross profit margin of 33.5%. Also, the adjusted effective income tax rate is envisioned at 24.1%.
Shares of this Zacks Rank #2 (Buy) company have rallied 6.1% in the past three months compared to the industry’s dip of 0.1%.
Looking for Other Consumer Staple Stocks? Check These
Some other top-ranked stocks from the sector are Lamb Weston ((LW - Free Report) ), General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) .
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods, carries a Zacks Rank #2 at present. General Mills has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for GIS’ current financial-year sales suggests growth of 4.6% from the year-ago reported number.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and EPS suggests growth of 2.7% and around 3.8%, respectively, from the corresponding year-ago reported figures.