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Will Lower Coffee Costs Aid J.M. Smucker (SJM) Q2 Earnings?

The J. M. Smucker CompanySJM is set to report fiscal second-quarter 2016 results before the opening bell on Nov 19.

Last quarter, this food products manufacturer delivered a positive surprise of 8.20%. Let's see how things are shaping up for this announcement.

We note that the company has posted positive earnings surprises in two of the last four quarters, a negative surprise in one and matched estimates in the remaining quarter, translating to an average positive surprise of 2.47%.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

Strong organic sales growth, product innovation and constant efforts to expand through acquisitions are the company's strong points. We expect recent acquisitions to pull up the top line to some extent in the soon-to-be-reported quarter.

The company completed the acquisition of pet food maker Big Heart Pet Brand in Mar 2015, which has placed Smucker in the fastest growing pet food and snacks category in the U.S. The acquisition will be accretive to fiscal 2016 earnings and revenues. However, the company anticipates a significant increase in marketing spend for Pet Food in the second quarter of fiscal 2016 related to launches.

Currency impact continues to remain a headwind through fiscal 2016 due to a further weakening of the Canadian dollar.

Nevertheless, we note that Smucker had announced a cut in coffee prices in July, which came into effect in the second quarter. This will therefore ease volumes in the soon-to-be-reported quarter.

Earnings Whispers?

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

Zacks ESP: The Earnings ESP for Smucker is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 97 cents per share.

Zacks Rank: Smucker's Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction difficult.

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.

Stocks to Consider

Stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank and are therefore worth considering include:

Inter Parfums, Inc. IPAR with an Earnings ESP of +16.67% and a Zacks Rank #1 (Strong Buy).

Constellation Brands, Inc. STZ with an Earnings ESP of +2.34% and a Zacks Rank #2 (Buy).

Snyder's-Lance, Inc. LNCE with an Earnings ESP of +2.50% and a Zacks Rank #3.

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SMUCKER JM (SJM): Free Stock Analysis Report

CONSTELLATN BRD (STZ): Free Stock Analysis Report

INTER PARFUMS (IPAR): Free Stock Analysis Report

SNYDERS-LANCE (LNCE): 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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