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Smucker (SJM) Q4 Earnings Surpass Estimates, Sales Up Y/Y

The J. M. Smucker Company SJM posted fourth-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales and earnings increased year over year.

The company primarily gained from stay-at-home orders, which were implemented to check the spread of the coronavirus. In fact, fiscal fourth-quarter revenues include nearly $185 million incremental sales relating to the pandemic when compared with the company’s prior expectations. Further, the bottom line benefitted to the tune of almost 50 cents per share when compared with the mid-point of its prior guidance. However, the company absorbed nearly $13 million as additional costs, thanks to the pandemic-led costs like employee bonus as well as costs to ensure better safety measures among others.

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


Quarter in Detail

Adjusted earnings of $2.57 per share rose nearly 24% year over year and comfortably beat the Zacks Consensus Estimate of $2.28. The year-over-year increase can be attributed to higher sales in the quarter.

Net sales amounted to $2,092 million, which beat the consensus mark of $2,058 million. Moreover, the top line increased 10% year over year on the back of higher consumer demand stemming from the coronavirus outbreak. Further, volume/mix improved in almost all brands and categories in U.S. Retail Coffee, U.S. Retail Pet Foods as well as U.S. Retail Consumer Foods segments. However, unfavorable net price realization mainly for coffee acted as a deterrent.

Adjusted gross profit increased nearly 12% year over year to $806.4 million and adjusted gross margin expanded 60 basis points to 38.5%. Adjusted operating income increased 22% year over year to $431.2 million and adjusted operating margin expanded 200 basis points to 20.6%.

Segment Performance

U.S. Retail Pet Foods: Segment sales came in at $767.8 million, which increased 6% from the prior-year quarter’s figure owing to coronavirus-led pantry stocking. Volume/mix increased for primarily all brands in the dog snacks and cat food categories. However, net price realization was lower in the quarter.

U.S. Retail Consumer Foods: Net sales rose 22% from the year-ago quarter to $480.5 million, driven by stay-at-home orders amid the COVID-19 outbreak. Volume/mix increased on account of growth in Smucker's, Crisco and Jif brands. Moreover, favorable net pricing mostly driven by Jif brand contributed to sales.

U.S. Retail Coffee Market: Sales in the segment increased 11% from the prior-year quarter’s figure to $581.6 million driven by higher at-home coffee consumption amid the pandemic. While, volume/mix was favorable in the quarter, net price realization was a deterrent.

International and Away From Home: Net sales improved $1.1 million from the prior-year quarter’s level to $262.1 million, thanks to favorable volume/mix that fully offset unfavorable foreign currency exchange.

Financials

Smucker exited the quarter with cash and cash equivalents of $391.1 million, long-term debt (less current portion) of $5,373.3 million and total shareholders’ equity of $8,190.9 million. Cash flow from operations amounted to $287.7 million in the fiscal fourth quarter and free cash flow totaled $211.3 million.

Fiscal 2021 Outlook

Smucker expects net sales to decline 1-2% year over year. The top-line view includes a decline of $185 million stemming from incremental net sales in fiscal fourth-quarter as well as nearly $120 million from coronavirus-led decline in the Away From Home segment.

Adjusted earnings per share for 2021 are anticipated within $7.90-$8.30. Smucker’s adjusted earnings came in at $8.76 per share in fiscal 2020. The bottom line is likely to be affected by reduced contributions from sales. Gross margin is anticipated to be nearly 37.5% in fiscal 2021. SD&A costs are projected to remain flat or decline slightly year over year. Free cash flow is expected in the range of nearly $900-$950 million.

Price Performance

Shares of this Zacks Rank #2 (Buy) company gained 4.3% in the past three months compared with the industry’s growth of 0.6%.

 



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Campbell Soup Company CPB, with a Zacks Rank #2, has a long-term earnings growth rate of 7.2%.

Kimberly Clark Corporation KMB, with a Zacks Rank #2, has a long-term earnings growth rate of 5.1%.

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