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Smucker (SJM) Q3 Earnings: Is the Stock Set to Disappoint?

Leading manufacturer of consumer food and beverage products, The J. M. Smucker CompanySJM , is set to report third-quarter fiscal 2017 results on Feb 17. The question lingering in investors' minds is, whether the company will be able to maintain its positive earnings surprise streak in the to-be-reported quarter. In fact, the company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average of 19.2%.

Smucker forms part of the Consumer Staples sector. As per the latest Zacks Earnings Preview , we note that Consumer Staples sector's earnings growth looks impressive. Total earnings for the sector are estimated to rise 10.6%, whereas revenues are projected to improve 4.1%.

Let's delve deeper how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let's look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The current Zacks Consensus Estimate for the quarter under review has declined over the past 30 days, and is currently pegged at $2.00, up from $1.76 delivered in the year-ago quarter. Analysts polled by Zacks expect revenues of $1,923 million, down roughly 2.6% from the prior-year period.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Smucker is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

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

Smucker has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.00. Further, the company has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing the Quarter

Smucker profitability largely depends on the prices of green coffee. Coffee prices are highly volatile and are affected by weather and pest infestation. Recently, management raised the prices of the majority of its packaged coffee products sold in the U.S. This might weigh upon the company's sales volume, alongside hurting its coffee segment.

Further, the company's top line has missed the Zacks Consensus Estimate for the second straight quarter as it reported second-quarter fiscal 2017. Sales in the quarter were marred by currency headwinds, lower coffee volumes, lower pricing, sluggish pet food sales and the divestiture of the U.S. canned milk business.

In addition, the International and Foodservice segment has been experiencing several challenges since the second quarter of fiscal 2014. The challenges were on the back of increased trade spending in the Foodservice coffee business, volume declines and currency headwinds. Looking forward, the currency headwinds are expected to linger through fiscal 2017. Additionally, Smucker's Consumer Foods segment is witnessing a decline in profits since the past few quarters due to the sale of its canned milk operations and lower demand for some products under its Jif and Pillsbury brands.

However, management remains optimistic of performing well, buoyed by its acquisitions and innovation programs. Further, the company remains focused on improving the performance of the mainstream dog and cat brands, while heightened competition in the pet food business in the near term remains a concern.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Pinnacle Foods Inc. PF has an Earnings ESP of +1.27% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Dean Foods Company DF has an Earnings ESP of +2.44% and a Zacks Rank #3.

Sanderson Farms, Inc. SAFM has an Earnings ESP of +0.78% and a Zacks Rank #3.

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Dean Foods Company (DF): Free Stock Analysis Report

Sanderson Farms, Inc. (SAFM): Free Stock Analysis Report

J.M. Smucker Company (The) (SJM): Free Stock Analysis Report

Pinnacle Foods, Inc. (PF): Free Stock Analysis Report

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


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

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