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The J.M. Smucker (SJM) Gains From Efficient Portfolio, Pricing
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The J. M. Smucker Company (SJM - Free Report) has been leveraging its core priorities, which have been helping the company improve in-store fundamentals and stock performance for the brands. A focus on reshaping the portfolio through prudent acquisitions and divestitures has been working well for the company.
Additionally, SJM has been benefiting from the sustained demand for its products, together with the favorable net price realization and effective cost control. These upsides keep the company well-positioned amid elevated selling, distribution and administrative (SD&A) costs.
Adding Leaves to the Growth Story
The J. M. Smucker is progressing well with core priorities, which include driving commercial excellence, reshaping its portfolio, streamlining the cost structure and unleashing its organization to win. The company is committed to increasing its focus and resources to reshape its portfolio to achieve sustainable growth across pet food and pet snacks, coffee as well as snacking categories.
SJM concluded the sale of its Bick's pickles, Habitant pickled beets, Woodman's horseradish and McLarens pickled onions brands to TreeHouse Foods earlier this month. Prior to this, the company divested Sahale Snacks in the second quarter of fiscal 2024 and concluded the divestiture of certain pet food brands in the fourth quarter of fiscal 2023.
SJM divested the Private Label Dry Pet Food business and the Natural Beverage and Grains business in the third quarter of fiscal 2022. These moves help the company focus its resources and portfolio on pet food, snacking and coffee categories.
Image Source: Zacks Investment Research
The J. M. Smucker actively pursues strategic acquisitions in the United States as well as overseas. The company acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $300 million in the third quarter. Going forward, Hostess Brands is likely to form around 15% of the company’s total sales.
Management expects long-term annual net sales growth of about 4% for the Sweet Baked Snacks business. The combined capabilities of Hostess Brands and The J.M. Smucker products are likely to result in strengthened distribution, supporting the company’s long-term growth expectations.
Additionally, management envisions annual cost synergies of around $100 million, with half of this expected to materialize in fiscal year 2025 and the full annualized amount to be achieved by the end of fiscal 2026. The Sweet Baked Snacks business is expected to positively impact adjusted earnings per share in the upcoming fiscal year.
Will Challenges Be Countered?
The J. M. Smucker appears troubled by elevated SD&A costs. Management’s bottom-line view for fiscal 2024 assumes elevated SD&A expenses. This includes costs related to Hostess Brands’ acquisition, along with pre-production costs associated with Uncrustables capacity expansion, elevated marketing expenditures and increased investments in liquid coffee.
However, the adept utilization of positive net price realization remains an upside. During the second quarter, net price realization contributed three percentage points to comparable net sales growth. For fiscal 2024, the company anticipates comparable net sales to rise 8.5-9% on elevated net pricing and a favorable volume/mix.
Shares of this Zacks Rank #3 (Hold) company have rallied 11.6% in the past three months compared with the industry’s growth of 11.4%.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and nearly 8%, respectively, from the year-ago reported numbers.
Lamb Weston (LW - Free Report) produces, distributes and markets frozen potato products. It currently has a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 28.1% and 26.3%, respectively, from the year-ago reported figure.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered a positive earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 24.7%, respectively, from the year-ago reported numbers.
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The J.M. Smucker (SJM) Gains From Efficient Portfolio, Pricing
The J. M. Smucker Company (SJM - Free Report) has been leveraging its core priorities, which have been helping the company improve in-store fundamentals and stock performance for the brands. A focus on reshaping the portfolio through prudent acquisitions and divestitures has been working well for the company.
Additionally, SJM has been benefiting from the sustained demand for its products, together with the favorable net price realization and effective cost control. These upsides keep the company well-positioned amid elevated selling, distribution and administrative (SD&A) costs.
Adding Leaves to the Growth Story
The J. M. Smucker is progressing well with core priorities, which include driving commercial excellence, reshaping its portfolio, streamlining the cost structure and unleashing its organization to win. The company is committed to increasing its focus and resources to reshape its portfolio to achieve sustainable growth across pet food and pet snacks, coffee as well as snacking categories.
SJM concluded the sale of its Bick's pickles, Habitant pickled beets, Woodman's horseradish and McLarens pickled onions brands to TreeHouse Foods earlier this month. Prior to this, the company divested Sahale Snacks in the second quarter of fiscal 2024 and concluded the divestiture of certain pet food brands in the fourth quarter of fiscal 2023.
SJM divested the Private Label Dry Pet Food business and the Natural Beverage and Grains business in the third quarter of fiscal 2022. These moves help the company focus its resources and portfolio on pet food, snacking and coffee categories.
Image Source: Zacks Investment Research
The J. M. Smucker actively pursues strategic acquisitions in the United States as well as overseas. The company acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $300 million in the third quarter. Going forward, Hostess Brands is likely to form around 15% of the company’s total sales.
Management expects long-term annual net sales growth of about 4% for the Sweet Baked Snacks business. The combined capabilities of Hostess Brands and The J.M. Smucker products are likely to result in strengthened distribution, supporting the company’s long-term growth expectations.
Additionally, management envisions annual cost synergies of around $100 million, with half of this expected to materialize in fiscal year 2025 and the full annualized amount to be achieved by the end of fiscal 2026. The Sweet Baked Snacks business is expected to positively impact adjusted earnings per share in the upcoming fiscal year.
Will Challenges Be Countered?
The J. M. Smucker appears troubled by elevated SD&A costs. Management’s bottom-line view for fiscal 2024 assumes elevated SD&A expenses. This includes costs related to Hostess Brands’ acquisition, along with pre-production costs associated with Uncrustables capacity expansion, elevated marketing expenditures and increased investments in liquid coffee.
However, the adept utilization of positive net price realization remains an upside. During the second quarter, net price realization contributed three percentage points to comparable net sales growth. For fiscal 2024, the company anticipates comparable net sales to rise 8.5-9% on elevated net pricing and a favorable volume/mix.
Shares of this Zacks Rank #3 (Hold) company have rallied 11.6% in the past three months compared with the industry’s growth of 11.4%.
3 Appetizing Bets
Sysco Corporation (SYY - Free Report) , a food and related product company, currently carries a Zacks Rank #2 (Buy). SYY delivered a back-to-back positive earnings surprise in the past two quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and nearly 8%, respectively, from the year-ago reported numbers.
Lamb Weston (LW - Free Report) produces, distributes and markets frozen potato products. It currently has a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 28.1% and 26.3%, respectively, from the year-ago reported figure.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered a positive earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 24.7%, respectively, from the year-ago reported numbers.