The J.M. Smucker (SJM) Q3 Earnings Beat Estimates, Volumes Up

The J. M. Smucker Company SJM posted impressive third-quarter fiscal 2024 results, wherein both the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. An improved volume/mix and net price realization, along with reduced costs, contributed to the results.

Third-quarter fiscal 2024 results reflect the impacts of the sale of the Canada condiment business (Jan 2, 2024), the acquisition of Hostess Brands (Nov 7, 2023), the divestiture of the Sahale Snacks (Nov 1, 2023) and the sale of certain pet food brands (Apr 28, 2023).

Management attributed its solid performance to the successful execution of strategic priorities, improved volumes, and continued loyalty of customers and consumers for the company's iconic brands. Further, the abovementioned acquisition and divestiture actions align with the company's strategic focus on enhancing growth by optimizing its portfolio and directing resources toward key areas such as coffee, snacking and pet foods.

Quarter in Detail

Adjusted earnings of $2.48 per share jumped 12% year over year and surpassed the Zacks Consensus Estimate of $2.27.

The J. M. Smucker Company Price, Consensus and EPS Surprise

The J. M. Smucker Company Price, Consensus and EPS Surprise

The J. M. Smucker Company price-consensus-eps-surprise-chart | The J. M. Smucker Company Quote

Net sales amounted to $2,229.2 million, which grew 1% year over year and beat the Zacks Consensus Estimate of $2,215 million. Excluding noncomparable sales related to acquisitions, divestitures and currency movements, net sales grew 6%. The uptick in comparable net sales can be attributed to the higher volume/mix (up 4%) and improved net price realization (up 2%).

The gross profit went up 9% due to increased net price realization, an improved volume mix, reduced costs and a positive impact of the Hostess Brands acquisition, partly negated by the impact of divestitures. The adjusted gross profit grew 12%. The adjusted operating income jumped 28% year over year to $457.5 million.

Segmental Performance

U.S. Retail Pet Foods: The segment’s sales tumbled 39% to $465.2 million compared with the Zacks Consensus Estimate of $436 million. Excluding non-comparable net sales associated with the pet food brand divestiture, net sales surged 20%. The volume/mix had a 13-percentage point positive impact on net sales, with the net price realization boosting the same by seven percentage points. The segment’s profit rose marginally to $109.5 million.

U.S. Retail Coffee: Net sales dropped 1% to $727.5 million. The volume/mix went up 3%, while the net price realization had a negative impact of 4%. The consensus estimate for the segment’s sales stood at $726 million. The segment’s profit rose 2% to $207.8 million.

U.S. Retail Frozen Handheld and Spreads: Sales in the segment increased 1% to $436.8 million. Excluding noncomparable sales in the year-ago period related to the divested Sahale Snacks business, net sales grew 2%. The volume/mix hurt net sales by 2%, while the net price realization boosted net sales by five percentage points. The segment’s profit went up by 11% to $104.1 million.

Sweet Baked Snacks: Sales in the segment came in at $300.3 million, with the segment profit amounting to $68 million in the third quarter.

International and Away from Home: Net sales advanced 4% to $299.4 million. Excluding the impact of noncomparable net sales associated with divestitures and currency movements, net sales grew 9%. The consensus mark for segment sales was pegged at $300 million.

The volume/mix had a five-percentage-point positive effect, and the net price realization had a positive impact of four percentage points on combined segment net sales. The segment’s profit increased 34% to $50.4 million.

Other Financials

The J. M. Smucker exited the quarter with cash and cash equivalents of $35.9 million, long-term debt of $8,121.1 million and total shareholders’ equity of $7,560.1 million.

Cash flow provided by operating activities amounted to $406.5 million for the three months ended Jan 31, 2024. Free cash flow was $249.6 million in the same time frame.

Free cash flow and capital expenditures are likely to be $500 million and $610 million, respectively, in fiscal 2024. Management had earlier expected fiscal 2024 free cash flow of $530 million.

Fiscal 2024 Guidance

For fiscal 2024, SJM now anticipates comparable net sales to rise 8.75% compared with the earlier view of 8.5-9%. The comparable net sales view reflects the positive impact of elevated net pricing and a favorable volume/mix.

Fiscal 2024 net sales are anticipated to decline 3.6% to $8.22 billion. This includes the impacts of divestitures and the recent buyout of Hostess Brands.

The adjusted EPS for fiscal 2024 is now envisioned in the $9.45-$9.65 band compared with the $9.15-$9.65 range expected earlier. The bottom-line guidance includes a net adverse impact of acquisitions and divestitures.  

The bottom-line view takes into account an adjusted gross profit margin of nearly 37.5% in fiscal 2024.

Shares of this Zacks Rank #4 (Sell) company have tumbled 15.3% over the past year compared with the industry’s decrease of 1.5%.

3 Food Picks

Post Holdings POST, a consumer packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 52.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings indicates growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently has a Zacks Rank #2 (Buy). 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.

Lamb Weston LW, a frozen potato product company, currently carries a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago period numbers.

Just Released: Zacks Top 10 Stocks for 2024

Hurry – you can still get in early on our 10 top tickers for 2024. Hand-picked by Zacks Director of Research, Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly TRIPLING the S&P 500’s +340.1%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2024. You can still be among the first to see these just-released stocks with enormous potential.

See New Top 10 Stocks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Post Holdings, Inc. (POST) : Free Stock Analysis Report

Lamb Weston (LW) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.