Smucker (SJM) Up 10.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Smucker (SJM). Shares have added about 10.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Smucker due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
The J.M. Smucker Q2 Earnings Top Estimates, Pricing Aids
The J. M. Smucker Company posted second-quarter fiscal 2024 adjusted earnings of $2.59 per share, which jumped 8% year over year and surpassed the Zacks Consensus Estimate of $2.47.
Net sales amounted to $1,938.6 million, which dropped 12% year over year and missed the Zacks Consensus Estimate of $1,960 million. Excluding noncomparable sales from divestitures and currency movements, net sales grew 7%. The uptick in comparable net sales can be attributed to the higher volume/mix and improved net price realization (mainly reflecting list price increases for the U.S. Retail Pet Foods, International and Away from Home and U.S. Retail Consumer Foods segments).
The gross profit went up 3% due to increased net price realization, a better volume mix and reduced green coffee costs. The adjusted gross profit also grew 3%. The adjusted operating income jumped 2% year over year to $385.4 million.
Segmental Performance
U.S. Retail Pet Foods: The segment’s sales tumbled 39% to $464 million compared with the Zacks Consensus Estimate of $475 million. Excluding non-comparable net sales associated with the pet food brand divestiture, net sales surged 20%. The volume/mix had a 12-percentage point positive impact on net sales, with the net price realization boosting the same by eight percentage points. The segment’s profit dropped 19% to $97.2 million.
U.S. Retail Coffee: Net sales dropped 3% to $685.7 million. The volume/mix remained neutral, while the net price realization had a negative impact of 4%. The consensus estimate for the segment’s sales stood at $708 million. The segment’s profit fell 9% to $171 million.
U.S. Retail Consumer Foods: Sales in the segment increased 7% to $464.3 million compared with the Zacks Consensus Estimate of $473 million. The volume/mix was neutral to sales, and the net price realization boosted net sales by seven percentage points. The segment’s profit went up by 28% to $128.5 million.
International and Away from Home: Net sales advanced 9% to $324.6 million. Excluding the impact of noncomparable net sales associated with the pet food brand divestiture and currency movements, net sales grew 13%. The consensus mark for segment sales was pegged at $305 million. The volume/mix had a seven-percentage-point positive effect, and the net price realization had a positive impact of five percentage points on combined segment net sales. The segment’s profit increased 45% to $60.2 million.
Fiscal 2024 Guidance
For fiscal 2024, the company now anticipates comparable net sales to rise 8.5-9% compared with the earlier view of 8.5-9.5%. The comparable net sales view reflects the positive impact of elevated net pricing and a favorable volume/mix. Net sales are anticipated to decline 3-3.5% in fiscal 2024, including the impacts of recent divestitures and acquisitions.
The adjusted EPS for fiscal 2024 is now envisioned in the $9.25-$9.65 band, lower than the $9.45-$9.85 range expected earlier. The bottom-line view reflects the positive impact of pricing and volume/mix, partly countered by elevated SD&A expenses. The updated bottom-line guidance now includes a net adverse impact of around 40 cents related to the buyout of Hostess Brands. The bottom-line view takes into account an adjusted gross profit margin of nearly 37.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -7.21% due to these changes.
VGM Scores
Currently, Smucker has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Smucker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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The J. M. Smucker Company (SJM) : Free Stock Analysis Report
