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SJM Stock Drops ~6% on Weak Second-Quarter Results, Lower Outlook

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Key takeaways

Today, J.M. Smucker (SJM) reported weaker-than-expected fiscal 2019 second-quarter results (period ended October 31). Its top line fell short of analysts’ estimate as it was dragged down by lower net price realization. However, the company’s top line improved YoY (year-over-year), driven by its acquisition of Ainsworth.

J.M. Smucker’s profit margins were weak and narrowed YoY. Lower peanut butter and oil pricing and higher peanut butter input costs and marketing expenses more than offset benefits from improved volumes and mix and lower green coffee costs.

Lower-than-expected sales and margin contraction affected J.M. Smucker’s bottom-line growth, and the company’s adjusted EPS improved YoY but missed analysts’ estimate. J.M. Smucker also lowered its sales and earnings guidance for the fiscal year, which is unlikely to sit well with investors. SJM stock was trading 6.7% lower during the pre-market session.

Key numbers

In the second quarter, J.M. Smucker’s net sales rose 5.1% YoY to $2.0 billion but fell short of analysts’ estimate of $2.1 billion. Its gross and operating margins contracted by 100 basis points each to 38.2% and 16.3%, respectively. The company’s adjusted EPS rose 7.4% YoY to $2.17, missing analysts’ estimate of $2.34.

J.M. Smucker now expects to generate net sales of $7.9 billion in fiscal 2019, down from its earlier expectation of $8.0 billion. It downgraded its adjusted earnings guidance to $8.00–$8.20 from $8.40–$8.65.

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