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JM Smucker Co. Tumbles on 1st-Quarter Earnings Miss

Shares of JM Smucker Co. (NYSE:SJM) fell sharply by 5.56% to $106.65 in premarket trading on Tuesday after the company missed consensus estimates on earnings for the first quarter of fiscal 2020 by 1 cent. The company posted $1.36 per share, which was nearly 16% higher year-over-year.

Revenue was $1.78 billion, down 6.3% from the prior-year quarter as a result of the sale of the U.S. baking business and lower pricing for peanut butter and coffee categories. Revenue fell $100 million short of expectations.

The Orrville, Ohio-based branded food and beverage products manufacturer and marketer also reported a 4% drop in comparable-store sales.

"We have continued momentum in many key product categories, and we are already taking decisive actions and prioritizing initiatives that strengthen our business," CEO Mark Smucker said in a statement. "We remain confident in our strategy, which includes a continued focus on our growth imperatives to lead in the best categories, build brands consumers love, and be everywhere, combined with a relentless focus on operating with financial discipline, all of which will enhance shareholder value for the long term."

Moreover, gross margin advanced 370 basis points year-over-year to 39.3% of total net sales in the first quarter of fiscal 2020, but adjusted operating income went down 8.3% to $291 million.

Operating cash flow declined 9% to $221.5 million. In contrast, free cash flow increased 4.8% to $148.5 million.

The balance sheet had $49 million in cash and equivalents and $1.01 billion in inventories as of July 31. Total debt amounted to $5.48 billion. Total equity was worth $8 billion.

Looking ahead, JM Smucker expects full fiscal 2020 revenue of $7.76 billion to $ 7.84 billion, versus a $7.86 billion consensus estimate. For earnings per share, it forecasted a range between $8.35 and $8.55 versus a $8.47 consensus. It guided for capital expenditures of $300 million to $320 million and an effective tax rate at 24.5% to 25%.

JM Smucker Co. closed at $112.93 per share on Monday, for a market capitalization of $12.88 billion. The stock has climbed 8% over the past year through Aug. 26 to above the 200-day simple moving average line. The share price at close Monday is still below the 100- and 50-day simple moving average lines.

The 52-week range is $91.32 to $128.43.

Analysts issued a hold recommendation rating for shares of JM Smucker Co. The average of analysts' price targets is $116.43, indicating the share price is forecasted to jump 9.2% within 52 weeks.

In the first-quarter results, the company raised the cash quarterly dividend it pays to its shareholders to 88 cents per common share from the prior 85 cents, for a 3.12% forward dividend yield versus the industry median of 2.3% and versus the S&P 500 index's yield of 1.95%. Yields are as of Aug. 26. The company will pay thedividend on Sept. 3 to the shareholders of record Aug. 16.

Disclosure: I have no positions in any security mentioned.

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This article first appeared on GuruFocus.