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Smucker (SJM) Q1 Earnings Surpass Estimates, Sales Up Y/Y

Zacks Equity Research
·5 mins read

The J. M. Smucker Company SJM posted first-quarter fiscal 2021 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year. The company raised its fiscal 2021 net sales, adjusted earnings per share and free cash flow outlook.

Quarter in Detail

Adjusted earnings of $2.37 per share rose 50% year over year and beat the Zacks Consensus Estimate of $1.68. The year-over-year increase can be attributed to higher sales in the quarter.

Net sales amounted to $1,971.8 million, which beat the consensus mark of $1,816.7 million. Moreover, the top line increased almost 11% year over year on the back of favorable volume/mix in all retail businesses stemming from higher at-home consumption for the U.S. Retail Coffee and U.S. Retail Consumer Foods units. However, lower volume/mix for the Away From Home business was a drag.

Adjusted gross profit increased 13% year over year to $759.2 million and adjusted gross margin expanded 80 basis points (bps) to 38.5%. Adjusted operating income increased 39% year over year to $404.5 million and adjusted operating margin expanded 420 bps to 20.5%.

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

Segment Performance

U.S. Retail Pet Foods: Segment sales came in at $692.6 million, up 3% from the prior-year quarter’s figure. Volume/mix increased 5 percentage points led by growth in Lives and Meow Mix cat food as well as Milk-Bone dog snacks. However, net price realization was lower in the quarter.

U.S. Retail Consumer Foods: Net sales rose 22% from the year-ago quarter’s levels to $489.2 million. Volume/mix improved 19 percentage points driven by higherat-home consumption and re-stocking of retailer inventory amid the COVID-19 outbreak. Moreover, favorable net pricing mostly driven by lower promotions for Jif peanut butter and Smucker's fruit spreads contributed to sales.

U.S. Retail Coffee Market: Sales in the segment increased 23% from the prior-year quarter’s figure to $570.9 million. The figure was driven by higher at-home coffee consumption and retailer inventory re-stocking amid the pandemic. While volume/mix increased 23 percentage points, net price realization was neutral.

International and Away From Home: Net sales decreased 9% from the prior-year quarter’s level to $219.1 million, thanks to unfavorable volume/mix to the tune of 8 percentage points. Also, unfavorable foreign currency exchange was a drag.

Financials

Smucker exited the quarter with cash and cash equivalents of $396.6 million, long-term debt (less current portion) of $4,672.8 million and total shareholders’ equity of $8,345.2 million. Cash flow from operations amounted to $409 million in the fiscal first quarter and free cash flow totaled $332.4 million.

Fiscal 2021 Outlook

Smucker now expects net sales to range from flat to 1% growth. Earlier it anticipated the metric to decline 1-2% year over year. The top-line view reflects escalated at-home consumption as well as re-stocking of retailer inventory in the fiscal first quarter. However, the view includes a decline of $185 million stemming from incremental net sales in the fourth quarter of fiscal 2020 as well as coronavirus-induced decline in the Away From Home segment.

Adjusted earnings per share for fiscal 2021 are now anticipated in the range of $8.20-$8.60. Prior to this, management expected adjusted earnings per share in the band of $7.90-$8.30. Smucker’s adjusted earnings came in at $8.76 per share in fiscal 2020. Gross margin is anticipated in the range of 37.5%-38%. SD&A costs are projected to increase 1-2% year over year. Free cash flow is expected in the range of $925-$975 million. Earlier, the company envisioned the metric in the band of $900-$950 million.

Price Performance

Shares of this Zacks Rank #3 (Hold) company gained 11.1% so far this year against the industry’s decline of 1%.

3 Solid Food Stocks

Campbell Soup CPB has a long-term earnings growth rate of 8.3% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TreeHouse Foods THS has a long-term earnings growth rate of 7.7% and a Zacks Rank #2.

McCormick MKC has a long-term earnings growth rate of 5.8% and a Zacks Rank #2.

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