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Smucker (SJM) Q3 Earnings Rise Y/Y, View Up on Tax Reforms
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The J. M. Smucker Company (SJM - Free Report) reported third-quarter fiscal 2018 results, wherein the company crushed its three-quarter long trend of posting year-over-year decline in earnings. In fact, both the top and bottom line improved year over year and surpassed the Zacks Consensus Estimate. Moreover, benefits from tax reforms encouraged management to raise its earnings outlook for fiscal 2018.
Quarter in Details
Adjusted earnings of $2.50 per share surged 25% year over year and surpassed the Zacks Consensus Estimate of $2.16. Notably, earnings included a nearly 35 cents benefit from tax reforms.
J.M. Smucker Company (The) Price, Consensus and EPS Surprise
Net sales in the quarter inched up 1% year over year to $1,903.3 million and also beat the consensus estimate of $1,888 million. Sales were fueled by growth across most core brands and categories. Further, favorable volume/mix (mainly in pet food and coffee segments) aided sales growth. However, this was somewhat negated by lower pricing at pet foods. Net sales received benefits of $5.8 million owing to favorable currency exchange.
Adjusted gross profit climbed 1% to $731.5 million, whereas adjusted gross margin contracted 10 basis points to 38.4%. Adjusted operating income for the quarter increased 4.4% to $399.8 million, though the adjusted operating margin contracted 40 basis points to 21%.
Segment Performance
U.S.Retail Coffee Market: The company's largest segment, U.S. Retail Coffee Market, reported 2% growth in sales to $550.5 million. This was backed by favorable volume/mix, primarily attributable to Dunkin' Donuts K-Cup pods and the Cafe Bustelo brand. This was somewhat countered by lower net price realization at the Folgers brand.
Segment profit jumped 6% to $182.1 million, due to improved volume/mix and lower input costs, somewhat negated by escalated marketing costs.
U.S.Retail Consumer Foods: Sales in the segment dipped 1% in the quarter to $511.6 million. Higher net price realization was more than offset by unfavorable volume/mix — mainly led by Crisco and Pillsbury brands, partly compensated by Smucker brand gains.
Segment profit increased 2% to $121.3 million as the impact of lower volume/mix was more than offset by higher pricing and operational efficiencies.
U.S.Retail Pet Foods: Net sales increased 2% to $561.9 million in the quarter owing to improved volume/mix, primarily related to the Nature's Recipe brand and the company’s pet snacks portfolio. This was partly countered by lower net price realization. Segment profit tumbled 7% to $118 million owing to higher marketing expenses and charges associated with obsolete inventory.
International and Away from Home: Effective May 1, 2017, the company's U.S. Foodservice business was renamed Away From Home.
Net sales grew 2% from the prior-year quarter to $279.3 million, reflecting favorable volume/mix driven by the Jif and Smucker's brands and positive impacts of currency rates. This was partly countered by lower net price realization. Segment profit surged 16% to reach $52.6 million thanks to favorable volume mix, positive currency impact and reduced marketing costs.
Financials
Smucker exited the quarter with cash and cash equivalents of $186.2 million, long-term debt of $4,688.5 million and total shareholders’ equity of $7,804 million. Cash flow from operations amounted to $469 million, and the company generated free cash flow of $388.7 million during the third quarter. During the first nine months of fiscal 2018, Smucker generated free cash flow of $693.3 million.
Concurrently, management stated that it contributed an additional amount of $20 million to its employee pension plan and announced a one-time bonus of $1,000 to approximately 5,000 employees — courtesy of benefits from tax reforms.
Fiscal 2018 Outlook
Management remains pleased with its third quarter performance, wherein results gained from sales growth in core brands in all businesses; tax reforms and solid cost-management.
Net sales for the fiscal 2018 is still anticipated to decline slightly or remain flat compared with the prior year.
However, Smucker raised earnings and free cash flow outlook, mainly on the basis of gains from tax reforms, somewhat offset by an expected rise in freight expenses. Effective tax rate is now expected to be 28%, much lower than 32.5%-33% forecasted earlier.
The company now envisions fiscal 2018 earnings in the range of $8.20-$8.30 per share, up from the previously guided range of $7.75-$7.90. The outlook doesn’t include any impact from the pending buyout of Wesson oil brand from Conagra Brands. Free cash flow is projected to be approximately $825 million, compared with $775 million expected earlier. Capital expenditures are still expected to be about $310 million in fiscal 2018.
Smucker currently carries a Zacks Rank#3 (Hold). Notably, the company’s shares have rallied 8.1% in the past three months, as against the industry’s dip of 0.9%.
Lamb Weston (LW - Free Report) with a Zacks Rank #2 has a splendid earnings surprise history and a long-term earnings growth rate of 12%.
Mondelez International (MDLZ - Free Report) , with a Zacks Rank #2 has a long-term growth rate of 12%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Smucker (SJM) Q3 Earnings Rise Y/Y, View Up on Tax Reforms
The J. M. Smucker Company (SJM - Free Report) reported third-quarter fiscal 2018 results, wherein the company crushed its three-quarter long trend of posting year-over-year decline in earnings. In fact, both the top and bottom line improved year over year and surpassed the Zacks Consensus Estimate. Moreover, benefits from tax reforms encouraged management to raise its earnings outlook for fiscal 2018.
Quarter in Details
Adjusted earnings of $2.50 per share surged 25% year over year and surpassed the Zacks Consensus Estimate of $2.16. Notably, earnings included a nearly 35 cents benefit from tax reforms.
J.M. Smucker Company (The) Price, Consensus and EPS Surprise
J.M. Smucker Company (The) Price, Consensus and EPS Surprise | J.M. Smucker Company (The) Quote
Net sales in the quarter inched up 1% year over year to $1,903.3 million and also beat the consensus estimate of $1,888 million. Sales were fueled by growth across most core brands and categories. Further, favorable volume/mix (mainly in pet food and coffee segments) aided sales growth. However, this was somewhat negated by lower pricing at pet foods. Net sales received benefits of $5.8 million owing to favorable currency exchange.
Adjusted gross profit climbed 1% to $731.5 million, whereas adjusted gross margin contracted 10 basis points to 38.4%. Adjusted operating income for the quarter increased 4.4% to $399.8 million, though the adjusted operating margin contracted 40 basis points to 21%.
Segment Performance
U.S.Retail Coffee Market: The company's largest segment, U.S. Retail Coffee Market, reported 2% growth in sales to $550.5 million. This was backed by favorable volume/mix, primarily attributable to Dunkin' Donuts K-Cup pods and the Cafe Bustelo brand. This was somewhat countered by lower net price realization at the Folgers brand.
Segment profit jumped 6% to $182.1 million, due to improved volume/mix and lower input costs, somewhat negated by escalated marketing costs.
U.S.Retail Consumer Foods: Sales in the segment dipped 1% in the quarter to $511.6 million. Higher net price realization was more than offset by unfavorable volume/mix — mainly led by Crisco and Pillsbury brands, partly compensated by Smucker brand gains.
Segment profit increased 2% to $121.3 million as the impact of lower volume/mix was more than offset by higher pricing and operational efficiencies.
U.S.Retail Pet Foods: Net sales increased 2% to $561.9 million in the quarter owing to improved volume/mix, primarily related to the Nature's Recipe brand and the company’s pet snacks portfolio. This was partly countered by lower net price realization. Segment profit tumbled 7% to $118 million owing to higher marketing expenses and charges associated with obsolete inventory.
International and Away from Home: Effective May 1, 2017, the company's U.S. Foodservice business was renamed Away From Home.
Net sales grew 2% from the prior-year quarter to $279.3 million, reflecting favorable volume/mix driven by the Jif and Smucker's brands and positive impacts of currency rates. This was partly countered by lower net price realization. Segment profit surged 16% to reach $52.6 million thanks to favorable volume mix, positive currency impact and reduced marketing costs.
Financials
Smucker exited the quarter with cash and cash equivalents of $186.2 million, long-term debt of $4,688.5 million and total shareholders’ equity of $7,804 million. Cash flow from operations amounted to $469 million, and the company generated free cash flow of $388.7 million during the third quarter. During the first nine months of fiscal 2018, Smucker generated free cash flow of $693.3 million.
Concurrently, management stated that it contributed an additional amount of $20 million to its employee pension plan and announced a one-time bonus of $1,000 to approximately 5,000 employees — courtesy of benefits from tax reforms.
Fiscal 2018 Outlook
Management remains pleased with its third quarter performance, wherein results gained from sales growth in core brands in all businesses; tax reforms and solid cost-management.
Net sales for the fiscal 2018 is still anticipated to decline slightly or remain flat compared with the prior year.
However, Smucker raised earnings and free cash flow outlook, mainly on the basis of gains from tax reforms, somewhat offset by an expected rise in freight expenses. Effective tax rate is now expected to be 28%, much lower than 32.5%-33% forecasted earlier.
The company now envisions fiscal 2018 earnings in the range of $8.20-$8.30 per share, up from the previously guided range of $7.75-$7.90. The outlook doesn’t include any impact from the pending buyout of Wesson oil brand from Conagra Brands. Free cash flow is projected to be approximately $825 million, compared with $775 million expected earlier. Capital expenditures are still expected to be about $310 million in fiscal 2018.
Smucker currently carries a Zacks Rank#3 (Hold). Notably, the company’s shares have rallied 8.1% in the past three months, as against the industry’s dip of 0.9%.
Looking for More Promising Stocks? Check These
J&J Snack (JJSF - Free Report) witnessed positive estimate revisions in the past 30 days. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lamb Weston (LW - Free Report) with a Zacks Rank #2 has a splendid earnings surprise history and a long-term earnings growth rate of 12%.
Mondelez International (MDLZ - Free Report) , with a Zacks Rank #2 has a long-term growth rate of 12%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>