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Headquartered in Orrville, OH, the J.M. Smucker Company is a consumer staples giant, manufacturing food, beverage, and pet food and snacks products in North America. Its brand portfolio includes well-known names like Folgers, Jif, Pillsbury, Hungry Jack, Meow Mix, Milk-Bone, and of course, Smucker’s.
Forecasting Better-Than-Expected 2019 Results
Like many consumer staples companies, Smucker is seeing a dramatic increase in sales as Americans continue to stock up their pantries during the coronavirus pandemic.
In a recent news release, the company said that it now only expects to see a 1% net sales decline versus its original guidance of a 3% decrease. Smucker’s capital expenditures should also be lower than the $300 million to $320 million it had initially projected.
Adjusted EPS is expected to be higher than the original range of $8.10 to $8.30 per share, while free cash flow should exceed the projected $850 million.
The company also said it is working on strengthening and expanding its supply chain in order to meet the current high demand.
As for precautionary measures, Smucker is now using temperature scanning on its workforce and implementing extra cleaning measures at its distribution facilities.
Looking ahead, SJM said it is withdrawing its fiscal 2021 guidance due to broad uncertainty and the unknown impact the outbreak may have on operations.
Shares of SJM have gained more than 15% compared to the S&P 500’s drop of roughly 11% so far this year. Earnings estimates have been rising, and Smucker is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, six analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 24 cents to $8.42 per share; earnings are expected to increase 1.6% compared to the prior year period. 2021 looks strong as well, with earnings expected to see 1.3% year-over-year growth.
SJM also offers potential investors value. It only trades at a 14X forward multiple, below its peers (21X) and the broader market (18X).
And, SJM boasts a 3% dividend yield. With a payout ratio of only 42%, SJM has room to continue to expand its dividend.
If you’re an investor searching for a consumer staples stock to add to your portfolio, make sure to keep SJM on your shortlist.
American Eagle Outfitters is a mall-based retailer that specializes in causal apparel, accessories, and footwear for men and women. AEO also operates popular lifestyle brand Aerie, which is known for their undergarments, loungewear, athleisure products, and swimsuits.
How AEO is Dealing With Coronavirus
Shares of American Eagle plunged nearly 40% last month as the apparel retailer began to deal with the negative impacts of the coronavirus pandemic.
AEO has had to temporarily shutter its stores and the company withdrew its fiscal 2020 first-quarter guidance. It has also furloughed employees, suspended its share repurchase program, and deferred the payment of its Q1 dividend.
The company, though, is making some moves to try and stem the impact.
AEO is now offering curbside pickup so that customers can get their order the same day without entering a store. It’s boosted its bond offering too, raising the possible total issue to $500 million.
And because its furloughed workers and deferred its dividend, along with reducing inventory and capital expenditures, AEO has been able to bring its current cash load to about $490 million.
As we’ve come to see, retail has now become one of the hardest hit industries during the outbreak, along with travel, hospitality, and restaurants. AEO is not only grappling with decreased store sales and store traffic, but its supply chain—it sources some of its goods and products from China—has been dealing with disruption since the crisis started earlier this year.
Even though shoppers can still order AEO product online, the majority of people are buying food and household essentials, not clothes.
Bottom Line
AEO is now a Zacks Rank #5 (Strong Sell). Eight analysts have cut their full year earnings outlook, and the consensus estimate has fallen 63 cents from $1.46 to $0.83 a share.
Up until the crisis, AEO had reported 20 consecutive quarters of revenue growth, and sales at its Aerie brand jumped 26% in Q4 2019.
The real damage from the coronavirus is still uncertain. American Eagle’s future revenue, earnings, and cash flow can’t be determined until the number of new cases begins to flatten and/or decline, and the length of the outbreak is figured out. It’s probably best to avoid consumer discretionary stocks like AEO for the time being.
Additional content:
Time to Take Profits on Beyond Meat (BYND - Free Report) Shares?
On April 2, I recommended you grab Beyond Meat shares, mainly based on positive feelings about a China launch. The shares have appreciated over 60% since my call, so it’s time to revisit the story.
Beyond Meat has since said that it will leverage Starbucks’ 3,300-odd stores across China as that market continues to see surging demand for faux meat, driven by a meat shortage, an existing taste for the thing and growing concerns about the environment (among a few). And since China is beginning to open restaurants, the timing couldn’t have been better. In fact, that’s probably why Yum! Brands’ KFC will also be launching Beyond products in China this week.
Beyond Meat is expected to report results next week. The company has most of its revenue coming from the U.S. and Europe, which have been particularly impacted by the pandemic. Moreover, a sizeable chunk (51%) of its business comes from its Restaurant and Food Service partnerships because those have picked up of late. And again, this is the segment that has been hard-hit by the pandemic.
So while its China business is just about taking off, there won’t be any impact on the March quarter. On the other hand, the weakness in its existing markets will tell on its first-quarter results.
Beyond Meat will have stock on its hands and we don’t know how well it will be able to store this. We also don’t know how much it will be able to redirect to the Retail segment, which should have picked up as more people cook at home in response to the pandemic. Also, given the nature of the product, there won’t be something like pent up demand, so whatever it stores will need storing for some time. Being able to transport extra production to China could be a good thing, but we don’t know if that was done, or even possible.
We also need more information about how its factories are functioning during the lockdown, whether it is resizing its staff and any other measures it may be taking to deal with the crisis.
The company could also see rising costs related to its China expansion, which while being necessary and positive on its own, could make an otherwise weak quarter appear even worse than it really is.
So yes, while they haven’t reached their 52-week high yet, and it’s really impossible to say how the market will react for sure, I think the shares are set for some battering in the not-too-distant future. The KFC launch in China likely won’t be enough to keep the shares up.
Since I continue to believe in the longer term potential of these shares, it seems like a good idea to offload some, take some gains, while hanging on to a portion for the longer term.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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J.M. Smucker, American Eagle Outfitters, Beyond Meat, Starbucks and Yum! Brands highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 28, 2020 – Zacks Equity Research Shares of J.M. Smucker Company (SJM - Free Report) as the Bull of the Day, American Eagle Outfitters (AEO - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Beyond Meat (BYND - Free Report) , Starbucks (SBUX - Free Report) and Yum! Brands (YUM - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Headquartered in Orrville, OH, the J.M. Smucker Company is a consumer staples giant, manufacturing food, beverage, and pet food and snacks products in North America. Its brand portfolio includes well-known names like Folgers, Jif, Pillsbury, Hungry Jack, Meow Mix, Milk-Bone, and of course, Smucker’s.
Forecasting Better-Than-Expected 2019 Results
Like many consumer staples companies, Smucker is seeing a dramatic increase in sales as Americans continue to stock up their pantries during the coronavirus pandemic.
In a recent news release, the company said that it now only expects to see a 1% net sales decline versus its original guidance of a 3% decrease. Smucker’s capital expenditures should also be lower than the $300 million to $320 million it had initially projected.
Adjusted EPS is expected to be higher than the original range of $8.10 to $8.30 per share, while free cash flow should exceed the projected $850 million.
The company also said it is working on strengthening and expanding its supply chain in order to meet the current high demand.
As for precautionary measures, Smucker is now using temperature scanning on its workforce and implementing extra cleaning measures at its distribution facilities.
Looking ahead, SJM said it is withdrawing its fiscal 2021 guidance due to broad uncertainty and the unknown impact the outbreak may have on operations.
Shares of SJM have gained more than 15% compared to the S&P 500’s drop of roughly 11% so far this year. Earnings estimates have been rising, and Smucker is a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, six analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 24 cents to $8.42 per share; earnings are expected to increase 1.6% compared to the prior year period. 2021 looks strong as well, with earnings expected to see 1.3% year-over-year growth.
SJM also offers potential investors value. It only trades at a 14X forward multiple, below its peers (21X) and the broader market (18X).
And, SJM boasts a 3% dividend yield. With a payout ratio of only 42%, SJM has room to continue to expand its dividend.
If you’re an investor searching for a consumer staples stock to add to your portfolio, make sure to keep SJM on your shortlist.
Bear of the Day:
American Eagle Outfitters is a mall-based retailer that specializes in causal apparel, accessories, and footwear for men and women. AEO also operates popular lifestyle brand Aerie, which is known for their undergarments, loungewear, athleisure products, and swimsuits.
How AEO is Dealing With Coronavirus
Shares of American Eagle plunged nearly 40% last month as the apparel retailer began to deal with the negative impacts of the coronavirus pandemic.
AEO has had to temporarily shutter its stores and the company withdrew its fiscal 2020 first-quarter guidance. It has also furloughed employees, suspended its share repurchase program, and deferred the payment of its Q1 dividend.
The company, though, is making some moves to try and stem the impact.
AEO is now offering curbside pickup so that customers can get their order the same day without entering a store. It’s boosted its bond offering too, raising the possible total issue to $500 million.
And because its furloughed workers and deferred its dividend, along with reducing inventory and capital expenditures, AEO has been able to bring its current cash load to about $490 million.
As we’ve come to see, retail has now become one of the hardest hit industries during the outbreak, along with travel, hospitality, and restaurants. AEO is not only grappling with decreased store sales and store traffic, but its supply chain—it sources some of its goods and products from China—has been dealing with disruption since the crisis started earlier this year.
Even though shoppers can still order AEO product online, the majority of people are buying food and household essentials, not clothes.
Bottom Line
AEO is now a Zacks Rank #5 (Strong Sell). Eight analysts have cut their full year earnings outlook, and the consensus estimate has fallen 63 cents from $1.46 to $0.83 a share.
Up until the crisis, AEO had reported 20 consecutive quarters of revenue growth, and sales at its Aerie brand jumped 26% in Q4 2019.
The real damage from the coronavirus is still uncertain. American Eagle’s future revenue, earnings, and cash flow can’t be determined until the number of new cases begins to flatten and/or decline, and the length of the outbreak is figured out. It’s probably best to avoid consumer discretionary stocks like AEO for the time being.
Additional content:
Time to Take Profits on Beyond Meat (BYND - Free Report) Shares?
On April 2, I recommended you grab Beyond Meat shares, mainly based on positive feelings about a China launch. The shares have appreciated over 60% since my call, so it’s time to revisit the story.
Beyond Meat has since said that it will leverage Starbucks’ 3,300-odd stores across China as that market continues to see surging demand for faux meat, driven by a meat shortage, an existing taste for the thing and growing concerns about the environment (among a few). And since China is beginning to open restaurants, the timing couldn’t have been better. In fact, that’s probably why Yum! Brands’ KFC will also be launching Beyond products in China this week.
Beyond Meat is expected to report results next week. The company has most of its revenue coming from the U.S. and Europe, which have been particularly impacted by the pandemic. Moreover, a sizeable chunk (51%) of its business comes from its Restaurant and Food Service partnerships because those have picked up of late. And again, this is the segment that has been hard-hit by the pandemic.
So while its China business is just about taking off, there won’t be any impact on the March quarter. On the other hand, the weakness in its existing markets will tell on its first-quarter results.
Beyond Meat will have stock on its hands and we don’t know how well it will be able to store this. We also don’t know how much it will be able to redirect to the Retail segment, which should have picked up as more people cook at home in response to the pandemic. Also, given the nature of the product, there won’t be something like pent up demand, so whatever it stores will need storing for some time. Being able to transport extra production to China could be a good thing, but we don’t know if that was done, or even possible.
We also need more information about how its factories are functioning during the lockdown, whether it is resizing its staff and any other measures it may be taking to deal with the crisis.
The company could also see rising costs related to its China expansion, which while being necessary and positive on its own, could make an otherwise weak quarter appear even worse than it really is.
So yes, while they haven’t reached their 52-week high yet, and it’s really impossible to say how the market will react for sure, I think the shares are set for some battering in the not-too-distant future. The KFC launch in China likely won’t be enough to keep the shares up.
Since I continue to believe in the longer term potential of these shares, it seems like a good idea to offload some, take some gains, while hanging on to a portion for the longer term.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.