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JM Smucker's 2nd-Quarter Earnings Surpass Estimates, but Revenue Falls Short

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JM Smucker Co. (NYSE:SJM) released its second-quarter results before the opening bell on Nov. 22. While the jam maker's earnings edged past Wall Street's estimates, revenue fell short primarily due to weak performance in the pet foods business.

By the numbers

The Orrville, Ohio-based company's adjusted earnings were $2.26 per share, up from $2.17 in the year-ago quarter. Revenue came in at $1.96 billion, down from $2.02 billion reported in the prior-year period. Analysts had anticipated earnings of $2.13 per share on revenue of $1.99 billion.


Reflecting on the company's performance, President and CEO Mark Smucker said:

"While our second-quarter sales performance did not meet our expectations, we delivered EPS growth ahead of our projections, reflecting our commitment to maintain financial discipline and strengthen our bottom line."

Segment performance

In the U.S. Retail Pet Foods segment, net sales decreased by $18.2 million owing to poor sales of private label products. Profit surged by $13.1 million thanks to 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 declined by $35.8 million on account of the divestiture of the baking business. Barring the non-comparable results, net sales decreased 1%. Segment profit during the quarter dropped by $42.9 million as a result of the $35.4 million profit associated with the divested baking business in the prior year. Excluding the impact of the divestiture, profit dipped 8%, reflecting positive net pricing and costs that were partly offset by higher volume mix and decline in selling, general and administrative costs.

Net sales in the coffee business declined by $1.5 million courtesy of lower net price realization from the Folgers and Dunkin' Donuts brands. By contrast, profit jumped $8.2 million on the back of a favorable volume mix.

In the overseas market, the company recorded a sales decline of $8.2 million due to lower volume mix as well as the negative impact from the divested U.S. baking business. Segment profit fell by $6.3 million.

Guidance

JM Smucker also provided fiscal 2020 guidance.

Adjusted earnings are projected to be between $8.10 and $8.30 per share for the year, which is down from the previously forecasted range of $8.35 to $8.55. Smucker is anticipating top-line growth decline 3%.

Free cash flow is expected to be roughly $850 million.

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

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This article first appeared on GuruFocus.