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Factors to Watch as Smucker (SJM) Gears Up for Q1 Earnings

Zacks Equity Research
·4 mins read

The J. M. Smucker Company SJM is likely to register an increase in the top and bottom lines when it reports first-quarter fiscal 2021 numbers on Aug 25, before market open. The Zacks Consensus Estimate for earnings has risen 1.2% over the past seven days to $1.71 per share, suggesting an 8.2% increase from the figure reported in the prior-year period. Notably, Smucker delivered an earnings surprise of 12.7% in the last reported quarter. Further, this consumer as well as pet food provider has a trailing four-quarter earnings surprise of 3.7%, on average.

The Zacks Consensus Estimate for revenues is pegged at almost $1,816 million, indicating an increase of 2.1% from the prior-year quarter’s reported figure.

The J. M. Smucker Company Price, Consensus and EPS Surprise

The J. M. Smucker Company Price, Consensus and EPS Surprise
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

Key Factors to Note

Smucker’s robust brand-building efforts through innovation, alliances and acquisitions have been yielding results. The company has been gaining from increased demand stemming from the coronavirus outbreak. The company’s U.S. Retail Coffee, U.S. Retail Pet Foods and U.S. Retail Consumer Foods segments have been benefiting from increased stock loading and higher at-home consumption stemming from the rising stay-at-home trends. Also, e-commerce is a fast-growing retail channel for the company. In the digital realm, the coffee and pet food categories have been steadily expanding. This channel is likely to have gained from the elevated social-distancing trends in the quarter under review.

However, the increased social distancing has severely hit demand for the away-from-home business due to the closure of restaurants, schools, offices and lodging. In its fourth-quarter earnings call, management said that it expects significant softness in the away-from-home business in fiscal 2021, which raises concerns for the quarter to be reported as well. The Zacks Consensus Estimate for first-quarter International and Away From Home sales is pegged at $195 million, suggesting a 19.1% decline from the figure reported in the year-ago period.

Apart from this, high COVID-19-related costs, volatile input costs and supply-chain hiccups remain concerns for the bottom line. Incidentally, pandemic-led costs include employee bonuses, hardship awards for frontline workers and costs to ensure better safety measures, among others.  Nonetheless, focus on cost reduction and optimization efforts is noteworthy.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Smucker this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Smucker currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.05%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Big Lots BIG has an Earnings ESP of +5.04% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has an Earnings ESP of +4.89% and a Zacks Rank #2.

Best Buy BBY has an Earnings ESP of +0.95% and a Zacks Rank #2.

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Zacks Investment Research