J.M. Smucker Stock Rose on Impressive Q3 Results



Key takeaways

J.M. Smucker (SJM) reported stronger-than-expected third-quarter (period ended January 31) results today. The company’s top line exceeded analysts’ estimate thanks to the incremental sales from its Ainsworth acquisition. Also, the improved volumes and mix in the U.S. Retail Coffee and U.S. Retail Consumer Foods segments supported its top-line growth.

Packaged food companies including J.M. Smucker, General Mills (GIS), Kellogg (K), Conagra Brands (CAG), Campbell Soup (CPB), and Hershey (HSY) are benefitting from the incremental sales from their recently acquired brands. Campbell Soup, which is expected to report its fiscal second-quarter results on February 27, is likely to post strong double-digit growth in sales, driven by its recent acquisitions. However, the base business remains challenged for these packaged food companies.

Improved volumes and mix drove J.M. Smucker’s adjusted gross and operating income. Adjusted gross profit increased 2%, while adjusted operating income rose 1%.

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J.M. Smucker handily exceeded analysts’ EPS estimate, which is encouraging, as it faced increased pressure on its earnings from the increase in interest expenses, lower pricing in the coffee segment, and cost headwinds. Also, the adjusted effective tax rate was significantly higher than in the prior year.

Fiscal Q3 key numbers

J.M. Smucker reported net sales of $2.0 billion, which came in ahead of analysts’ estimate and increased about 6% on a YoY basis. Benefits from the Ainsworth acquisition, improved volumes, and a favorable mix supported the top-line growth. However, the divestiture of the baking business remained a drag.

The company posted adjusted earnings of $2.26 per share, which decreased about 10% on a YoY basis, reflecting higher interest expenses and higher taxes. However, J.M. Smucker’s adjusted EPS came in ahead of analysts’ estimate of $2.01.

J.M. Smucker stock was trading about 7% higher in the pre-market session.


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