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Earnings Preview: Smucker

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Ohio-based The J. M. Smucker Company (SJM - Free Report) is all set to unveil its fourth quarter and fiscal year 2012 results on June 7, 2012, before the market opens. The Zacks Consensus Estimate for the fourth quarter is 99 cents per share (year-over-year decrease of 1%). The Zacks Consensus Revenue Estimate for the fourth quarter is $1.352 billion (year-over-year increase of 14%).

For the fiscal year 2012, the Zacks Consensus Estimate is $4.69 per share (same as  the prior-year), which exceeds the company’s guidance range of $4.60 – $4.65 per share. The Zacks Consensus Revenue Estimate is $5.521 billion (year-over-year increase of 14%), which also matches the company’s guidance of $5.5 billion.

Third Quarter Overview

Smucker delivered third-quarter 2012 adjusted earnings of $1.22 per share, lagging behind the Zacks Consensus Estimate of $1.41 and the prior-year quarter's earnings of $1.27 per share. The sluggish results in the quarter were led by greater-than-anticipated decline in the overall sales volume, despite robust sales growth.

Net sales in the quarter increased 12% year over year to $1.47 billion, due to pricing actions and the impact of acquisitions. The Zacks Consensus Revenue Estimate was $1.50 billion.

Agreement of Estimates Revision

Over the past 30 days, only one of the 12 analysts providing estimates on Smucker has revised the earnings estimates for the fourth quarter of 2012, and the revision was in the downward direction. Similarly, earnings estimates were revised in a negative direction for the fiscal 2012 by one of the 10 analysts providing estimates over the same period.

For the fiscal year 2013, 2 of the 12 analysts providing estimates on Smucker have lowered their earnings estimate over the past 30 days.

Recently, Smucker has slashed its packaged coffee prices by an average 6% owing to continuous decline in green coffee costs. However, coffee prices are highly volatile and are affected by weather and pest damage and also from political decisions in the coffee-producing countries. Moreover, the analysts might have reduced earnings estimates with the company's announcement of guidance cut. We thus expect a negative trend for the upcoming quarter and year.

Magnitude of Estimate Revisions

The earnings estimate for the fourth quarter as well as fiscal 2012 has remained static over the past 30 days at 99 cents per share and at $4.69 per share, respectively. For fiscal year 2013, the earnings estimate has declined from $5.28 to $5.24 per share over the past 30 days.

Surprise History

Smucker has surpassed earnings estimates in two of the last four quarters. The company has recorded a maximum positive surprise of 3.70%, with a minimum of negative surprise of 13.48%. On average, the earnings surprise was negative 3.73%.

Our Recommendation

Smucker, which competes with Starbucks Corporation (SBUX - Free Report) , currently has a Neutral recommendation. The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).

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