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Smucker (SJM) Unveils Strategic Growth Pillars, Retains View

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Zacks Equity Research
·3 min read
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The J. M. Smucker Company SJM is on track to undertake robust efforts to augment the business in an attempt to create long-term and sustainable shareholder value. To this end, the company recently outlined strategic priorities and laid out long-term financial targets. Moreover, management reiterated its fiscal 2021 outlook.

Smucker Focuses on Strategic Framework

Smucker’s strategic plan includes redesigning the portfolio, upgrading the commercial model and streamlining the organization. In this regard, management laid down four pillars of operational priorities for the next 12-18 months.

As part of operational priorities, Smucker expects to drive commercial excellence by transforming the marketing and sales model. Through this growth pillar, it also plans to create a dedicated pet food sales organization.

Further, the company expects to streamline the cost infrastructure by staying committed to enhance productivity, while focusing on lowering costs. Management notified that this will help it in generating $50 million of annual cost savings in each of the next three fiscal years. Also, management expects to delayer and streamline the organization, with an aim of enhancing decision making and attaining agility through its “Unleashing the organization to win” strategic pillar.

 

 

In addition, Smucker is on track to reshape its portfolio. This involves making investments in areas of maximum growth potential, and exit brands and businesses that are not in sync with long-term goals.

In the recent past, Smucker entered into a definitive agreement to offload the Natural Balance premium pet food business to Nexus Capital Management LP. This will allow the company to focus on key brands in the pet food and pet snacks portfolio. Early December, the company also divested Crisco oils and shortening business to B&G Foods, Inc. BGS.

Keeping in mind the strategic framework and in-depth portfolio review, the company laid out long-term annual growth targets. Incidentally, it expects net sales increase of 2%, while adjusted earnings per share growth of 8% in the long term. It targets operating income growth of 5%. Also, management expects total shareholder return to be 10% or more in the long run.

Fiscal 2021 Outlook Reaffirmed

For fiscal 2021, management continues to anticipate net sales growth to be flat to up 1% and the bottom line in the band of $8.35-$8.65 per share. Also, Smucker envisions free cash flow in the range of $975-$1,025 million for the fiscal year.

Shares of this Zacks Rank #3 (Hold) company have gained 11.2% so far this year compared with the industry’s 1.3% growth.

Better-Ranked Food Stocks

The Hain Celestial HAIN, currently holding a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 24.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medifast, Inc. MED, having a Zacks Rank #2 at present, has a trailing four-quarter earnings surprise of 20.2%, on average.

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