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The J.M. Smucker (SJM) Gains From Focus on Core Categories
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The J. M. Smucker Company (SJM - Free Report) has been benefiting from strong brand demand and net price realization. A focus on core priorities, such as reshaping the portfolio and streamlining the cost structure, has proven effective. This Zacks Rank #3 (Hold) company’s concentration on key growth areas, including coffee, snacking and pet, keeps it well-positioned for sustained business momentum amid hurdles. Let’s delve deeper.
Key Upsides
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. Strength in such strategies has been helping the company improve in-store fundamentals and stock performance for the brands.
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. Apart from this, management has been optimizing its supply chain, lowering discretionary costs and expanding network production efficiencies.
Image Source: Zacks Investment Research
The J.M. Smucker has been focused on reshaping the portfolio through prudent acquisitions and divestitures. The company divested the Canadian condiments business in January 2024 and Sahale Snacks in November 2023. It also offloaded certain pet food brands in April 2023. The J.M. Smucker concluded the divestiture of the Private Label Dry Pet Food business as well as the Natural Beverage and Grains business in the third quarter of fiscal 2022.
Prior to this, management divested the Natural Balance premium pet food business in February 2021. Also, Smucker sold its Crisco oils and shortening business to B&G Foods in December 2020. These moves help the company focus its resources and portfolio on core growth categories. The J. M. Smucker also actively pursues strategic acquisitions both in the United States as well as overseas. SJM acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $650 million in fiscal 2024.
In the third quarter of fiscal 2024, sales in the Sweet Baked Snacks segment came in at $300.3 million, with the segment profit amounting to $68 million. Management earlier projected 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.
Hurdles to be Countered?
The J. M. Smucker has been incurring high selling, distribution and administrative (SD&A) costs. Though it expects SD&A expenses to be flat year over year in fiscal 2024, the guidance includes pre-production costs associated with Uncrustables capacity expansion and elevated marketing expenditures.
Management expects fourth-quarter adjusted EPS to decrease by a mid-teen percentage, mainly due to pre-production expenses of nearly $20 million associated with the new Uncrustables facility, along with additional marketing investments. Total marketing expenses are likely to be 5.3% of net sales in fiscal 2024 compared with 5.2% in fiscal 2023.
Nonetheless, sustained demand across brands and categories, together with favorable net price realization and effective cost control, keeps The J. M. Smucker well-placed. The company’s third-quarter sales were driven by its Pet Foods segment, advancement in the Away From Home business and strength in the Frozen Handheld and Spreads segment.
Management expects the positive momentum in Away From Home channels to continue. This, along with volume/mix gains from all three U.S. Retail segments, sustained brand and business momentum and pricing, is likely to drive comparable net sales growth in fiscal 2024.
For fiscal 2024, the company anticipates comparable net sales to rise 8.75% on elevated net pricing and a favorable volume/mix. Fourth-quarter comparable sales are expected to increase in the mid-single digits. However, overall net sales are likely to decline 3.6% in fiscal 2024 due to the impact of recent divestitures.
Shares of SJM have risen 2.6% in the past three months compared with the industry’s growth of 15.5%.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks and currently carries a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.
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The J.M. Smucker (SJM) Gains From Focus on Core Categories
The J. M. Smucker Company (SJM - Free Report) has been benefiting from strong brand demand and net price realization. A focus on core priorities, such as reshaping the portfolio and streamlining the cost structure, has proven effective. This Zacks Rank #3 (Hold) company’s concentration on key growth areas, including coffee, snacking and pet, keeps it well-positioned for sustained business momentum amid hurdles. Let’s delve deeper.
Key Upsides
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. Strength in such strategies has been helping the company improve in-store fundamentals and stock performance for the brands.
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. Apart from this, management has been optimizing its supply chain, lowering discretionary costs and expanding network production efficiencies.
Image Source: Zacks Investment Research
The J.M. Smucker has been focused on reshaping the portfolio through prudent acquisitions and divestitures. The company divested the Canadian condiments business in January 2024 and Sahale Snacks in November 2023. It also offloaded certain pet food brands in April 2023. The J.M. Smucker concluded the divestiture of the Private Label Dry Pet Food business as well as the Natural Beverage and Grains business in the third quarter of fiscal 2022.
Prior to this, management divested the Natural Balance premium pet food business in February 2021. Also, Smucker sold its Crisco oils and shortening business to B&G Foods in December 2020. These moves help the company focus its resources and portfolio on core growth categories. The J. M. Smucker also actively pursues strategic acquisitions both in the United States as well as overseas. SJM acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $650 million in fiscal 2024.
In the third quarter of fiscal 2024, sales in the Sweet Baked Snacks segment came in at $300.3 million, with the segment profit amounting to $68 million. Management earlier projected 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.
Hurdles to be Countered?
The J. M. Smucker has been incurring high selling, distribution and administrative (SD&A) costs. Though it expects SD&A expenses to be flat year over year in fiscal 2024, the guidance includes pre-production costs associated with Uncrustables capacity expansion and elevated marketing expenditures.
Management expects fourth-quarter adjusted EPS to decrease by a mid-teen percentage, mainly due to pre-production expenses of nearly $20 million associated with the new Uncrustables facility, along with additional marketing investments. Total marketing expenses are likely to be 5.3% of net sales in fiscal 2024 compared with 5.2% in fiscal 2023.
Nonetheless, sustained demand across brands and categories, together with favorable net price realization and effective cost control, keeps The J. M. Smucker well-placed. The company’s third-quarter sales were driven by its Pet Foods segment, advancement in the Away From Home business and strength in the Frozen Handheld and Spreads segment.
Management expects the positive momentum in Away From Home channels to continue. This, along with volume/mix gains from all three U.S. Retail segments, sustained brand and business momentum and pricing, is likely to drive comparable net sales growth in fiscal 2024.
For fiscal 2024, the company anticipates comparable net sales to rise 8.75% on elevated net pricing and a favorable volume/mix. Fourth-quarter comparable sales are expected to increase in the mid-single digits. However, overall net sales are likely to decline 3.6% in fiscal 2024 due to the impact of recent divestitures.
Shares of SJM have risen 2.6% in the past three months compared with the industry’s growth of 15.5%.
3 Appetizing Bets
The Chef’s Warehouse (CHEF - Free Report) , which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 3.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal-year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks and currently carries a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.