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Things to Know Before The J.M. Smucker's (SJM) Q1 Earnings

·3 min read
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The J. M. Smucker Company SJM is likely to display year-over-year declines in the top and bottom lines, when it reports first-quarter fiscal 2022 numbers on Aug 26. The Zacks Consensus Estimate for revenues is pegged at $1,796 million, suggesting a decrease of 8.9% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at $1.87 per share, which indicates a decline of 21.1% from the figure reported in the prior-year period.

The J. M. Smucker Company Price, Consensus and EPS Surprise
The J. M. Smucker Company Price, Consensus and EPS Surprise

Key Factors to Note

The J. M. Smucker’s retail business has been seeing softness due to tough comparisons with the year-ago period’s stock hoarding trends resulting from the initial pandemic outbreak. Also, impacts from the divestitures of Crisco (concluded in December 2020) and Natural Balance (January 2021) businesses are likely to have affected the company’s performance.

On its last earnings call, management stated that it expects the pandemic to continue impacting its results in fiscal 2022. Apart from this, volatile consumer behavior, retailer inventory levels, any manufacturing or supply-chain hurdles, and macroeconomic factors can affect The J. M. Smucker’s performance this year. For fiscal 2022, The J. M. Smucker expects a net sales decline of 2-3%, year over year, which includes an impact of $355.6 million associated with the Crisco and Natural Balance divestitures. Management expects to see softness in at-home consumption trends, whereas rebound in away from home channels will likely be upsides. These factors are likely to have impacted the company’s performance during the quarter under review.

Apart from this, The J. M. Smucker has been seeing high SG&A costs on account of elevated higher marketing investments. Selling, distribution and administrative expenses have also been rising year over year for a while. For fiscal 2022, management expects gross margin to be hurt by escalated costs of commodities, ingredients, as well as packaging. These are likely to be somewhat compensated by improved pricing, productivity savings and gains from divestitures.

Benefits from pricing, revival in the Away From Home division and strength in Smucker's Uncrustables brand are anticipated to have been upsides. Additionally, The J. M. Smucker has been gaining on rising e-commerce sales. On its last earnings call, the company said that it expects continued strength in the e-commerce channel in the forthcoming periods as consumers adapt to online shopping amid the pandemic.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for The J. M. Smucker this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The J. M. Smucker currently carries a Zacks Rank #3 and has an Earnings ESP of +0.46%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Burlington Stores BURL has an Earnings ESP of +15.26% and sports a Zacks Rank #1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale COST has an Earnings ESP of +0.44% and currently holds a Zacks Rank #3.

General Mills GIS has an Earnings ESP of +1.32% and carries a Zacks Rank #3, currently.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

General Mills, Inc. (GIS) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

The J. M. Smucker Company (SJM) : Free Stock Analysis Report

Burlington Stores, Inc. (BURL) : Free Stock Analysis Report

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