Why Did J.M. Smucker Stock Fall?



Stock fell 2%

The J.M. Smucker Company (SJM) posted its fiscal 4Q17 results on June 8, 2017. After the results, J.M. Smucker stock fell ~2% and closed at $128.51. Despite reporting a better-than-expected quarter, soft top and bottom line performance didn’t sit well with investors.

Besides, management expects that 1H18 will likely remain challenging. Management is guiding for lower bottom line results for fiscal 1Q18, which reflects decreased profitability in the company’s coffee and pet foods segments. Increased marketing spend to support the launch of new products, tough year-over-year comparables, and increased competition will likely impact the company’s earnings per share.

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Notably, the packaged food industry as a whole is having a tough time. Sales remain sluggish amid consumers’ shift towards low priced wholesome foods, while increased competition pressures profitability. Peers including Tyson Foods (TSN) and Campbell Soup (CPB) also disappointed investors with their dismal quarterly results. Lower volumes and higher promotional spending amid increased competition to drive sales had a negative impact on the companies’ financials.

J.M. Smucker lags the broader index

As of June 8, J.M. Smucker stock underperformed the broader index in terms of stock price appreciation on a YTD (year-to-date) basis. The company’s stock remains roughly flat, while the S&P 500 Index (SPX) and the Consumer Staples Select Sector SPDR ETF (XLP) rose 9% and 10%, respectively, during the same period.

In comparison, the company also lags its larger rivals including The Hershey Company (HSY), Mondelez International (MDLZ), and Kraft Heinz (KHC). The companies have been witnessing an uptrend following their last reported quarter due to the expectation of better performances in 2H17 and a rebound in consumer spending, innovation-led product launches, and stringent cost control measures. On a YTD basis, Hershey, Mondelez International, and Kraft Heinz stock have risen 10%, 5%, and 6%, respectively.

 Series overview

In this series, we’ll analyze J.M. Smucker’s latest quarterly results. We’ll focus on the company’s sales and profitability. We’ll also look at the company’s valuation and analysts’ recommendations.


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