Post Earnings Coverage as JM Smucker Earnings Surge

LONDON, UK / ACCESSWIRE / August 26, 2016 / Active Wall St. announces its post-earnings coverage on The J. M. Smucker Company (NYSE: SJM). The company announced its first quarter fiscal 2017 earnings on August 23rd, 2016. The owner of Smucker’s line of peanut butter, jellies, and ice cream toppings as well as brands such as Folger’s Coffee and Pillsbury, posted better-than-expected earnings, although, sales missed market expectations. The company also reduced its sales outlook for FY 2017. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the three months ended on July 31, 2016, J.M. Smucker reported net income of $170 million, or $1.46 per share, up 25% on y-o-y basis from $136.4 million, or $1.14 per share, in the year earlier quarter. On an adjusted basis, earnings rose 16% to $1.86 per share from $1.60, beating Wall Street’s expectations of $1.73, driven by incremental synergy realization, higher operating income, lower tax rate, and lower share count. Synergy realization was $32 million in Q1 FY17, and the company remains on track to achieve $100 million of incremental synergies in FY 2017.

J.M. Smucker reported revenue of $1.82 billion in Q1 FY17, down 7% from $1.95 billion in Q1 FY16. Analysts had projected sales of $1.89 billion. The drop in sales was attributed to the divestiture of Smucker’s canned milk business, increased competition in the pet food segment, and, lower prices. Excluding the divested business and foreign exchange impact, net sales dropped 5%. Unfavorable volume/mix, driven by the U.S. Retail Pet Foods segment, also contributed to lower net sales. This is the company’s first revenue decline in six quarters.

Segment Analysis

During Q1 FY17, J.M. Smucker’s U.S. Retail Coffee segment reported a decline of 9.0% in sales to $513.3 million from $565 million a year earlier. This was attributable to the impact of two 6% list price declines since the beginning of FY16. Favorable volume/mix for the Folgers® and Café Bustelo® brands was offset by declines for Dunkin’ Donuts® K-Cup® pods, which were anticipated following the successful introduction of the product line at the beginning of fiscal 2016.

J.M. Smucker’s U.S. Retail Consumer Foods reported an 8% drop in sales to $537.0 million due to the divested U.S. canned milk business. Excluding the impact of the divestiture, net sales decreased 2%. Volume/mix was flat with the prior-year quarter as contributions from the R.W. Knudsen Family and Sahale Snacks brands were offset by a decrease for the Smucker’s brand.

Sales in the company’s pet food line slumped 6% to $519.5 million due to unfavorable volume/mix which impacted nets sales by 5%. Unfavorable volume was due to Kibbles ‘n Bits and Meow Mix mainstream pet food, and the Natural Balance brand. A slight decline in net price realization also contributed to the decrease in net sales. The company acquired Big Heart Pet Brands, makers of Meow Mix cat food and Milk-Bone dog treats, for $3.2 billion in March 2015. Sales from that business declined last quarter, with consumer moving to premium brands that are considered as healthier options for dogs and cats. Sales of Premium dog-food has soared 45% to $10.5 billion in the past six years, according to Euromonitor International. Net sales in the International and Foodservice segment fell 3% from Q1 FY16 to $246.0 million, due to lower net price realization, currency headwinds, and the divested U.S. canned milk business.

Outlook

J.M. Smucker reiterated its FY17 earnings guidance which was in the range of $7.60 per share to $7.75 per share. However, management expects net sales to decline in the range of 2% to 3% compared to FY16. The decline in sales expectation is due to reduced net sales forecast for U.S. Retail Pet Foods.

Stock Performance

At the close of trading session on August 25, 2016, J.M. Smucker’s shares were down 0.91%, ending the day at $140.99, with a total volume of 1.32 million shares traded. The company’s stock price has gained 16.07% since the beginning of the year and 31.93% in the last twelve months.

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