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The J.M. Smucker (SJM) Readies for Q1 Earnings: Things to Note

·6 min read

The J. M. Smucker Company SJM is likely to register a top and bottom-line decline when it reports first-quarter fiscal 2023 earnings on Aug 23. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,848 Million, suggesting a drop of 0.6% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for quarterly earnings has risen by a penny in the past seven days to $1.25 per share, which, however, indicates a 34.2% decline from the figure reported in the prior-year quarter. The branded food and beverage product company has a trailing four-quarter earnings surprise of 12.7%, on average. SJM delivered an earnings surprise of 18.6% in the last reported quarter.

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

Factors to Note

The J. M. Smucker is encountering cost inflation, as well as supply-chain and transportation challenges, along with isolated labor shortages. In its fourth-quarter earnings release, management stated that pandemic-related impacts, together with cost inflation and a volatile supply chain, continue to affect the company’s results and cause risks for fiscal 2023. The company expects cost inflation to have an impact of the mid-to-high-teen percentage on the total cost of products sold in fiscal 2023. Management’s EPS guidance for fiscal 2023 includes the expected impact of inflated costs and elevated selling, distribution and administrative (SD&A) expenses. SD&A expenses are expected to rise about 9%, mainly due to higher compensations, elevated pre-production expenses and greater marketing expenditure.

Apart from this, results for the quarter under review are likely to be affected by the company’s product recall. After Apr 30, 2022, The J. M. Smucker initiated a voluntary recall of certain Jif peanut butter products made at its Lexington, KY facility and sold mainly in the United States. The move was a result of potential salmonella contamination. The product recall impacted the company’s performance in the fourth quarter of fiscal 2022 and is likely to affect the fiscal 2023 top and bottom lines. The fourth-quarter top line included a 1% adverse impact related to expected customer returns associated with the Jif peanut butter product recall. Further, management’s sales guidance for fiscal 2023 includes a 2% adverse impact related to the product recall.

In the first quarter of fiscal 2023, management expects net sales to have been flat year over year and earnings to have decreased about 35%, mainly due to the product recall impact.

On contrary, the positive net price realization has been working well for the company. Additionally, The J. M. Smucker has been progressing well with core priorities, which include driving commercial excellence, reshaping the portfolio, streamlining the cost structure and unleashing its organization to win. Strength in such strategies is helping The J. M. Smucker navigate through complex supply-chain challenges.

The company is benefiting from strength in its coffee business. The overall coffee portfolio looks encouraging as at-home coffee habits created during the pandemic and at-home consumption remain high. In the fourth quarter, net sales for coffee grew 11%, backed by all brands in the company’s market-leading at-home coffee portfolio. Management stated that there is solid momentum in its Coffee business. At-home consumption now forms more than 70% of coffee drinking occasions, per management’s fourth-quarter earnings call. These aspects bode well for the quarter to be reported.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for J. M. Smucker this time. 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, which is the case here.

J. M. Smucker carries a Zacks Rank #3 and has an Earnings ESP of +0.64%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

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

Dollar General DG currently has an Earnings ESP of +1.14% and a Zacks Rank #2. DG is expected to register top and bottom-line growth when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for Dollar General’s quarterly revenues is pegged at $9.4 billion, which suggests growth of 8.5% from the prior-year quarter’s reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dollar General’s quarterly earnings has moved a penny down in the past seven days to $2.91 per share, suggesting an improvement of 8.2% from the year-ago quarter’s tally. DG delivered an earnings beat of 2.8%, on average, in the trailing four quarters.

Ulta Beauty ULTA currently has an Earnings ESP of +2.37% and a Zacks Rank #2. The company is likely to register a bottom-line improvement when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for quarterly earnings per share of $4.86 suggests an improvement from the $4.56 reported in the year-ago quarter.

Ulta Beauty's top line is also expected to have risen year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2.2 billion, which indicates an improvement of 11.7% from the figure reported in the prior-year quarter. ULTA has a trailing four-quarter earnings surprise of 49.8%, on average.

Dollar Tree DLTR currently has an Earnings ESP of +1.75% and a Zacks Rank of 2. The company is likely to register a rise in the top and bottom lines when it reports second-quarter fiscal 2022 results. The Zacks Consensus Estimate for DLTR’s quarterly revenues is pegged at $6.8 billion, which suggests a jump of almost 7% from the figure reported in the prior-year quarter.

The consensus mark for Dollar Tree’s quarterly earnings has remained unchanged at $1.57 per share in the past 30 days. The consensus estimate for DLTR’s quarterly earnings suggests a rise of 27.6% from the year-ago quarter’s reported figure. Dollar Tree delivered an earnings surprise of 13.1%, on average, in the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Dollar General Corporation (DG) : Free Stock Analysis Report
 
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
 
The J. M. Smucker Company (SJM) : Free Stock Analysis Report
 
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