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Peanut butter recall hits J.M. Smucker earnings

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Yahoo Finance Live anchors discuss fourth-quarter earnings for J.M. Smucker.

Video Transcript

BRAD SMITH: Also, we've got to check in on JM Smucker. This one's for the lunchbox fans out there, hitting a sour note with investors, though, this morning. However, the shares are up by about 1.3%, despite strong earnings due to supply chain uncertainty, inflation, and recalls.

The food products company warning, though, of a $125 million hit in the full year because of recalls of its peanut butter products over a possible salmonella contamination. There, you're taking a look at the actuals versus the estimates. They beat on both the top and bottom lines in this most recent quarter for the company.

BRIAN SOZZI: Yeah, looking at the guidance here, guys, guidance for this year profits, 7.85 to 8.25 a share. The Street was $8.82 in terms of adjusted. So if you're looking for the impact of inflation, it certainly shows up in that outlook, which is, they're not alone, Smucker. You saw Hormel report last week. Inflationary-- they're getting hurt by inflation. We've talked to Conagra Brands, another food company get hit over the head with inflation. Not getting the sense that there's any peak in inflation when it comes to food companies and many other goods.

JULIE HYMAN: Yeah, it's a little surprising to see the stock up. I didn't have a chance to look at the conference call, so perhaps it has to do with pricing power. Who knows what's going on at Smucker? They talk about the JIF recall. And certainly, that weighed on things. But also-- and even though they did beat last quarter-- the adjusted gross margin came in pretty far below estimates, 32.2%, the estimate for 34 and 1/2%. So you would think that we would be seeing more pressure on the shares than we are seeing this morning.

BRIAN SOZZI: Yeah, you mentioned pricing. I'll add quickly, pricing up 10% in this quarter for Smucker, volume down 1%. So all morning long, we've been talking about this theme where consumers are balking at some of these price increases, whether it's home goods at Target. Are they starting to balk at food? Because if that is the case, we could be here a couple of months from now when Target reports its earnings again, and they're warning yet again, as consumers pull back on food and other items, in addition to home goods.

BRAD SMITH: Well, apparently, in these results, they already are starting to push back against that. If pricing is up 10%, your net sales are only up by about 6%. And then that correlation perhaps could be something that we look to in the future and point to exactly where they still need to increase that pricing, but these sales aren't necessarily going dollar for dollar, or at least, in direct correlation there.

I just lastly have to add here, because this is one of the only companies that I'll ever get to talk about Uncrustables, and one of my favorite items to put into the lunch bag or the backpack at this point in time. You just toss them in there, great to go.

BRIAN SOZZI: I thought you were a no sugar guy.

BRAD SMITH: There's no sugar in them.

BRIAN SOZZI: OK, I'll take him on that.

JULIE HYMAN: Oh, Brad. I do wonder, though, when you look at the sales numbers, how much JIF took a bite out of that, right? So that's something you kind of-- this is a little bit of an unusual issue here at Smucker.