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Earnings Growth Led J.M. Smucker’s Stock Performance

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Earnings growth

The J.M. Smucker Company (SJM) reported its fiscal 4Q16 and fiscal 2016 results on June 9, 2016. The company ended fiscal 2016 with strong earnings.

SJM has a history of long-term growth. It has increased its earnings at a CAGR (compound annual growth rate) of 7% in the last five years.

SJM’s adjusted EPS (earnings per share) in fiscal 4Q16 rose drastically by 49% year-over-year. Higher earnings were driven by SJM’s coffee segment along with a favorable price-to-cost relationship. A better-than-expected volume for mainstream and premium coffee brands also benefited the company.

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SJM reported EPS of $1.44, 21% higher than analysts’ estimates. The company continued its trend of surpassing earnings estimates. Its fiscal 2016 EPS came in at ~$6.15, a rise of 14% compared to fiscal 2015. This was slightly below the company’s updated guidance range. However, it beat analysts’ estimates of $5.78 by 6%. This tremendous rise in earnings contributed to the rising trend in the stock’s price in June.

Expectations for fiscal 2017

With its fiscal 4Q16 results, the company also provided projections for its fiscal 2017 earnings. It expects its adjusted EPS to be in the range of $7.60–$7.75 in fiscal 2017. This projection is based on 116.6 million shares outstanding after the company’s share repurchases in fiscal 4Q16.

The guidance also includes $100 million worth of incremental synergies in fiscal 2017. However, it excludes an amortization expense of $208 million, or $1.18 per diluted share.

Peers’ earnings

J.M. Smucker’s peers in the packaged food industry include ConAgra Foods (CAG) and Hain Celestial (HAIN).

  • ConAgra Foods’ EPS for fiscal 4Q16 are expected to fall by 11%.
  • Hain Celestial’s EPS for fiscal 4Q16 are expected to rise by 8%.

To gain exposure to SJM, you can invest in the PowerShares S&P 500 Low Volatility ETF (SPLV) and the First Trust Large Cap Growth AlphaDEX ETF (FTC), both of which invest around 1.0% of their holdings in SJM.

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