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The J.M. Smucker's (SJM) Core Priorities Aid, SD&A Costs Hurt
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The J. M. Smucker Company (SJM - Free Report) has been benefiting from strong brand demand and net price realization. Core priorities, such as portfolio reshaping and cost structure streamlining, have proven effective.
However, elevated selling, distribution and administrative costs are expected to impact the bottom line in fiscal 2024. Also, net sales are forecasted to decline in the fiscal 2024 due to the recent divestitures. Nonetheless, SJM’s unwavering focus on key growth platforms of coffee, snacking and pet foods keeps it well-placed for the long run. In fact, for fiscal 2024, the Zacks Rank #3 (Hold) company anticipates comparable net sales to rise 8.5-9% on elevated net pricing and a favorable volume/mix.
Core Strategies Underway
The J. M. Smucker’s core priorities include driving commercial excellence, reshaping its portfolio, streamlining cost structure and unleashing its organization to win. Strength in such strategies has been helping the company improve in-store fundamentals and stock performance for the brands. The company is implementing inflation-justified pricing actions across all businesses.
It is also committed to increasing its focus and resources to reshape its portfolio to achieve sustainable growth across pet food and pet snacks, coffee as well as snacking categories. The company divested Sahale Snacks and announced the sale of its Canadian condiments business in the second quarter of fiscal 2024.
The J. M. Smucker concluded the divestiture of certain pet food brands in the fourth quarter of fiscal 2023 to reshape the portfolio. This brings the pet business structure to include 60% pet snacks and 40% cat food. This move, which will help the company direct more resources toward the fast-growing and higher-margin dog snacks category, is expected to enhance the product mix and profit over time. SJM anticipates increasing its dog snacks portfolio to $1 billion (in annual net sales) in the next few years.
Image Source: Zacks Investment Research
The J. M. Smucker also pursues strategic acquisitions in the United States as well as overseas to solidify its portfolio. It acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $300 million in the third quarter. Going forward, Hostess Brands is likely to form around 15% of the company’s total sales.
High SD&A Costs
The J. M. Smucker’s bottom-line view for fiscal 2024 assumes elevated SD&A expenses. This includes costs related to Hostess Brands’ acquisition, along with pre-production costs associated with Uncrustables capacity expansion, elevated marketing expenditures and increased investments in liquid coffee.
Wrapping Up
The J. M. Smucker has been benefiting from the sustained demand for its products, together with the favorable net price realization and effective cost control. For fiscal 2024, the adjusted EPS is expected to be in the band of $9.25-$9.65, including the net adverse impacts of the pet food divestiture and Hostess Brands acquisition. Excluding the impact of the dilution related to the Hostess Brands acquisition, the adjusted EPS is likely to increase nearly 10% year over year.
Management expects long-term annual net sales growth of about 4% for the Sweet Baked Snacks business. The combined capabilities of Hostess Brands and The J.M. Smucker products are likely to result in strengthened distribution, supporting the company’s long-term growth expectations. Additionally, management envisions annual cost synergies of around $100 million, with half of this expected to materialize in fiscal 2025 and the full annualized amount to be achieved by the end of fiscal 2026.
Shares of SJM have lost 1.2% in the past three months compared with the industry’s decline of 1.1%.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, Inc. (CELH - Free Report) , which develops, processes, markets, distributes and sells functional drinks and liquid supplements, holds a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.
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The J.M. Smucker's (SJM) Core Priorities Aid, SD&A Costs Hurt
The J. M. Smucker Company (SJM - Free Report) has been benefiting from strong brand demand and net price realization. Core priorities, such as portfolio reshaping and cost structure streamlining, have proven effective.
However, elevated selling, distribution and administrative costs are expected to impact the bottom line in fiscal 2024. Also, net sales are forecasted to decline in the fiscal 2024 due to the recent divestitures. Nonetheless, SJM’s unwavering focus on key growth platforms of coffee, snacking and pet foods keeps it well-placed for the long run. In fact, for fiscal 2024, the Zacks Rank #3 (Hold) company anticipates comparable net sales to rise 8.5-9% on elevated net pricing and a favorable volume/mix.
Core Strategies Underway
The J. M. Smucker’s core priorities include driving commercial excellence, reshaping its portfolio, streamlining cost structure and unleashing its organization to win. Strength in such strategies has been helping the company improve in-store fundamentals and stock performance for the brands. The company is implementing inflation-justified pricing actions across all businesses.
It is also committed to increasing its focus and resources to reshape its portfolio to achieve sustainable growth across pet food and pet snacks, coffee as well as snacking categories. The company divested Sahale Snacks and announced the sale of its Canadian condiments business in the second quarter of fiscal 2024.
The J. M. Smucker concluded the divestiture of certain pet food brands in the fourth quarter of fiscal 2023 to reshape the portfolio. This brings the pet business structure to include 60% pet snacks and 40% cat food. This move, which will help the company direct more resources toward the fast-growing and higher-margin dog snacks category, is expected to enhance the product mix and profit over time. SJM anticipates increasing its dog snacks portfolio to $1 billion (in annual net sales) in the next few years.
Image Source: Zacks Investment Research
The J. M. Smucker also pursues strategic acquisitions in the United States as well as overseas to solidify its portfolio. It acquired the premier snacking company, Hostess Brands, in November 2023, which is expected to contribute sales worth roughly $300 million in the third quarter. Going forward, Hostess Brands is likely to form around 15% of the company’s total sales.
High SD&A Costs
The J. M. Smucker’s bottom-line view for fiscal 2024 assumes elevated SD&A expenses. This includes costs related to Hostess Brands’ acquisition, along with pre-production costs associated with Uncrustables capacity expansion, elevated marketing expenditures and increased investments in liquid coffee.
Wrapping Up
The J. M. Smucker has been benefiting from the sustained demand for its products, together with the favorable net price realization and effective cost control. For fiscal 2024, the adjusted EPS is expected to be in the band of $9.25-$9.65, including the net adverse impacts of the pet food divestiture and Hostess Brands acquisition. Excluding the impact of the dilution related to the Hostess Brands acquisition, the adjusted EPS is likely to increase nearly 10% year over year.
Management expects long-term annual net sales growth of about 4% for the Sweet Baked Snacks business. The combined capabilities of Hostess Brands and The J.M. Smucker products are likely to result in strengthened distribution, supporting the company’s long-term growth expectations. Additionally, management envisions annual cost synergies of around $100 million, with half of this expected to materialize in fiscal 2025 and the full annualized amount to be achieved by the end of fiscal 2026.
Shares of SJM have lost 1.2% in the past three months compared with the industry’s decline of 1.1%.
3 Appetizing Picks
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2 (Buy). KHC has a trailing four-quarter earnings surprise of 9.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, Inc. (CELH - Free Report) , which develops, processes, markets, distributes and sells functional drinks and liquid supplements, holds a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29.4% from the year-ago reported figure.