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JM Smucker Posts Disappointing 1st-Quarter Results

JM Smucker Co. (NYSE:SJM) released its first-quarter results before the opening bell on Aug. 27. The company's earnings and revenue fell short of estimates as adverse shipment timings, severe competition in the pet food industry and lower pricing for coffee and peanut butter were a drag on quarterly results.

Snapshot of the quarter

The Orrville, Ohio-based company's first-quarter adjusted earnings were $1.58 per share, which missed Wall Street's estimates of $1.75 and declined 11% year over year. Revenue of $1.78 billion missed analysts' expectations of $1.87 billion and decreased 6.5% from the prior-year quarter.

The jam maker's adjusted gross profit was $670.6 million, down 4.2%. Adjusted gross margins were 37.7%, expanding 90 basis points.

At quarter-end, company had cash and cash equivalents of $48.8 million and long-term debt, barring current maturities, of $4.6 billion.

Segment details

In the U.S. Retail Pet Foods segment, net sales amounted to $669.9 million, down $1.3 million year over year. Barring the addition of Ainsworth pet nutrition sales, net sales declined $26.7 million on account of poor sales of private label products. Profit jumped to $19.7 million courtesy of synergy realization and positive net pricing, which was only partially offset by mounting input costs and lower volume mix.

Sales in the U.S. Retail Consumer Foods division totaled $402.2 million, down 17% on the back of the divestiture of the baking business. Excluding the non-comparable results, segment profit declined 3% since reduced net pricing was partly offset by improved volume mix.

In the coffee business, net sales plunged $23.8 million to $465.7 million thanks to lower net price realization as well as lower volume mix. Profit plummeted by $18.9 million on account of reduced volume mix and the net impact of lower prices and green coffee expenses.

In the overseas market, the company recorded a 7% drop in net sales to $241.1 million, owing to lower net price realization, unfavorable volume mix and negative impact from the divested baking business. Profit in the segment declined by $11.1 million.

Financial forecast

JM Smucker also provided fiscal 2020 guidance.

Adjusted earnings per share are expected to be between $8.35 and $8.55, which is down from the previous guidance of $8.45 to $8.65. Smucker is projecting top-line growth to be down 1% to flat.

While free cash flow is forecasted to be around $875 million to $925 million, capital spending is anticipated to range from $300 million to $320 million.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.