The J.M. Smucker Company
) delivered first-quarter fiscal 2013 adjusted earnings (excluding
special project costs of 17 cents) of $1.17 per share, which
exceeded the Zacks Consensus Estimate of $1.00 by 17%.
Earnings also surpassed the prior-year quarter's adjusted
earnings of $1.12 per share. Robust sales growth and lower
outstanding shares due to share buyback boosted the earnings.
Net sales in the quarter increased 15% year over year to $1.36
billion compared with $1.18 billion a year ago. The results were in
line with the Zacks Consensus Revenue Estimate. The year-over-year
increase was primarily driven by volume gains on the back of
product innovation and productivity initiatives.
The company completed its acquisition of the North American
foodservice coffee and hot beverage business from
Sara Lee Corporation
on January 3, 2012. The acquisitions contributed 7 percentage
points to net sales growth.
Volume excluding the impact of acquisition went up 2% in the
reported quarter, on the back of higher volume gain of Jif peanut
butter and Folgers coffee.
Excluding special project costs of $3.9 million, gross profit
increased to $473.7 million compared with $441.5 million in the
year-ago period. Gross margin contracted 250 basis points (bps) to
34.6% in the first-quarter of fiscal 2013 due to higher costs for
green coffee and peanuts. Operating margin, excluding the impact of
the project costs, contracted 140 basis points (bps) to 15.9%.
Retail Coffee Market
: The company's biggest segment, U.S. Retail Coffee Market,
reported a 4% increase in sales to $520.8 million, aided by
increased volume and sales mix of K-Cups. Volume went up 5% in the
first quarter on the back of volume gains of Folgers brand and
The segment's operating margin contracted 366 bps to 24.3% in
the quarter, high coffee costs.
Retail Consumer Foods:
The U.S. Retail Consumer Foods segment's sales rose 15% to $528.4
million, driven by higher price realization and favorable sales
mix. Volume went up by 1% during the quarter.
The segment's profit margin inflated 320 bps to 20.4% in the
quarter, primarily due to price increases in peanut butter and
benefit of unrealized mark-to-market adjustments on derivative
International, Foodservice and Natural Foods:
Net sales in the International, Foodservice and Natural Foods
segment increased 40% over previous year to $320.5 million. Volume
increased by 4% in the quarter.
The segment's profit margin declined 410 bps to 12.7% in the
first quarter of fiscal 2013, partially reflecting higher supply
chain costs and marketing expense.
Cash and cash equivalents as of July 31, 2012 were $311.5
million versus $102.5 million as of July 31, 2011.
Long-term debt as of July 31, 2012 amounted to $2.0 billion,
compared with $1.3 billion in July 31, 2011.
Fiscal 2013 Guidance
The company has maintained its sales guidance for fiscal 2013.
Management expects its net sales to increase 7% over the prior-year
period. The sales guidance reflects the expected net sales
contribution from the Sara Lee business.
The fiscal 2013 adjusted earnings, excluding special project
costs of 50 cents per share, are expected to range from $5.00 to
$5.10 per share. The company expects the earnings to be at the
higher end of its guidance range.
Currently, we hold a Zacks #3 Rank (short-term Hold rating) on
Smucker which competes with
Green Mountain Coffee Roasters Inc.
). Over the long term, we have a Neutral recommendation on the
GREEN MTN COFFE (GMCR): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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