J.M. Smucker Company Raised Guidance for Fiscal 2016



Dividend declared

J.M. Smucker (SJM) had a dividend yield of 2.1% as of November 20, 2015. The company’s management has been raising the dividend for the last five years. Dividend rose at an average annual rate of 11.9%. The company increased the quarterly dividend and paid $0.67 per share to shareholders on September 1, 2015. On October 16, the company announced a $0.67 per share dividend on the common shares. J.M. Smucker will pay the dividend on Tuesday, December 1, of the calendar year 2015, to shareholders of record at the close of business on November 13.

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Its competitors include Mondelez (MDLZ), Pinnacle Foods (PF), and Cal-Maine Foods (CALM). They reported YTD (year-to-date) returns of 21.0%, 21.7%, and 45.5%, respectively, as of November 20, 2015. The PowerShares Dynamic Food and Beverage (PBJ) invests 3.0% of its portfolio in CALM stock. As of November 20, PBJ recorded YTD returns of 6.0%.

Outlook for fiscal 2016

The company updated its full-year fiscal 2016 guidance in the second quarter that includes the expected effect of the canned milk divestiture on operating results. J.M. Smucker expects net revenue of ~7.9 billion even after the sale of this business. It raised the low end of its non-GAAP (generally accepted accounting principles) EPS (earnings per share) range. The company expects EPS to be in the range of $5.70-$5.80 for fiscal 2016. It anticipates the adjusted non-GAAP EPS to be in the range of $6.85-$6.95, excluding amortization expense of ~$1.15 per share. The change in the new guidance reflects the strong coffee results expectations.

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The EPS guidance range includes $25 million of synergies related to the Big Heart acquisition. An $8 million of synergy has already been realized through the first six months of fiscal 2016. The company also expects net sales to rise ~38% to $7.9 billion in comparison to the prior fiscal year. This would include a full year contribution from Big Heart and a rise of ~3% on the rest of the company’s businesses.

The net sales and earnings guidance also includes the estimated impact of the canned milk divestiture on the company’s operating results. However, it excludes a projected one-time gain of $0.10-$0.15 per share associated with the transaction, likely to close by December 31, 2015. Free cash flow is expected to be $925 million, and capital expenditures are expected to be $220 million.


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