J.M. Smucker’s Earnings: What to Expect from Q2

The J.M. Smucker Company (SJM) is set to announce its fiscal 2020 second-quarter earnings results on November 22. We expect the decline in J.M. Smucker’s sales and earnings to moderate on a sequential basis. However, both its revenue and adjusted EPS could continue to decline YoY (year-over-year).

The company started fiscal 2020 on a weak note, with both its sales and EPS marking YoY declines. The shift in the timing of shipments in its coffee category and competitive activity in the premium dog food category took a toll on its top line. Lower pricing in the coffee and peanut butter categories further affected its sales growth.

Weak sales and a lower operating margin pressured its bottom line. J.M. Smucker’s adjusted EPS fell about 11% YoY. Both its revenue and EPS came in below Wall Street’s expectations, and management cut its sales and EPS guidance for the full year.

 J.M. Smucker’s earnings: What analysts expect

Analysts expect J.M. Smucker to post revenue of $1.97 billion in the second quarter, implying a YoY decline of 2.5%. Lower pricing in the coffee and peanut butter categories could continue to affect its organic sales and, in turn, its overall revenue. Aggressive pricing by competitors in the premium dog food category could also pose challenges.

However, volumes in the coffee category could improve, reflecting a shift in the timing of shipments to the second quarter. Promotions are likely to support its peanut butter category’s volumes.

SJM’s profit margins are likely to gain from favorable input cost trends. However, lower net price realizations could continue to hurt it.

Analysts expect J.M. Smucker to post adjusted EPS of $2.13 in the second quarter, down about 2% YoY. Lower sales and pressure on its margins are expected to hurt its EPS. However, the rate of decline in its EPS is likely to slow significantly.

What analysts recommend on SJM

Analysts’ consensus target price for SJM indicates no further upside. Their average target price on the stock is $105.91, which is roughly on par with its closing price on November 20.

Recently, Credit Suisse downgraded SJM from “neutral” to underperform” and reduced its target price to $95. However, most analysts covering the stock are staying on the sidelines. Nine out of 13 suggest “holds” on SJM, while four recommend “sells.”