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Acquisitions Are Set to Drive J.M. Smucker’s Q4 Sales

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Consensus estimate

Wall Street expects the J.M. Smucker Company’s (SJM) top line to continue to improve and mark strong growth in the fourth quarter of fiscal 2019. Analysts expect the company to post net sales of $1.9 billion, which implies a YoY (year-over-year) growth rate of 8.2%. Its projected sales also indicate a sequential improvement in its growth rate. During the previously reported quarter, J.M. Smucker’s net sales marked 5.7% growth.

Incremental sales from the acquisition of Ainsworth in combination with improved organic volumes and a favorable mix are expected to drive J.M. Smucker’s sales. Moreover, it faces easy YoY comparisons, which should further support its sales growth rate.

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The acceleration in the sales growth rates of packaged food companies has stemmed from the incremental sales from their recently acquired brands. For instance, J.M. Smucker’s Ainsworth acquisition has been the primary driver of the acceleration in its sales growth rate. During its last-reported quarter, Ainsworth added ~$199 million to its top line.

In comparison, General Mills’ (GIS) Blue Buffalo acquisition, Conagra Brands’ (CAG) acquisition of Pinnacle Foods, and the Campbell Soup Company’s (CPB) Pacific Foods and Snyder’s-Lance acquisitions have been driving their top lines.

Outlook

Analysts expect J.M. Smucker’s top line growth to slow significantly in fiscal 2020 as the company annualizes its Ainsworth acquisition and faces tough YoY comparisons. Wall Street expects J.M. Smucker’s top line to decline in the first half of fiscal 2020, which implies a steep slowdown on a sequential basis.

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