Will J.M Smucker's (SJM) Earnings Disappoint this Season? - Analyst Blog


The J. M. Smucker Co. ( SJM ) is set to report first-quarter fiscal 2015 results before the opening bell on Aug 20. Last quarter, this food products manufacturer posted a positive earnings surprise of 4.3%. Let's see how things are shaping up prior to the announcement.

Factors to Consider this Past Quarter

For the past few years, J. M. Smucker's sales have been impacted by a decline in net price realization, mainly in coffee and K-cups. Although the company raised coffee prices in Jun 2014 in response to higher green coffee costs, it has not done so for the K-cups.

Management expects sales to improve in fiscal 2015 backed by strong performance of its K-cup business. However, margins are expected to be under pressure in the to-be-reported quarter due to overall cost inflation and incremental investments in marketing and promotional activity.

Moreover, per media reports, unseasonal rains in the last two months have lowered coffee production thus increasing coffee prices even further. 

Earnings Whispers?

Our proven model does not conclusively show that J. M. Smucker is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP  and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: ESP for J. M. Smucker stands at -2.19% as the Zacks Consensus Estimate stands at $1.37 per share while the Most Accurate estimate stands at $1.34.

Zacks Rank: J. M. Smucker currently has a Zacks Rank #3 (Hold) which when combined with a -2.19% ESP lowers the chances of an earnings beat.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Sanderson Farms Inc. ( SAFM ), with an Earnings ESP of +4.92% and a Zacks Rank #1 (Strong Buy). 

Abercrombie & Fitch Company. ( ANF ), with an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy). 

Shoe Carnival Inc. ( SCVL ), with an Earnings ESP of +5.88% and a Zacks Rank #2.

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ABERCROMBIE (ANF): Free Stock Analysis Report

SMUCKER JM (SJM): Free Stock Analysis Report

SHOE CARNIVAL (SCVL): Free Stock Analysis Report

SANDERSON FARMS (SAFM): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ANF , SJM , SCVL , SAFM



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