JM Smucker Co. (SJM, Financial) released its third-quarter results for fiscal 2020 on Feb. 26 before the opening bell. While Smucker’s earnings beat Zacks’ consensus estimate, revenue marginally missed. The U.S. pet foods segment, which is company’s largest sales segment, saw a decline during the quarter.
The Orrville, Ohio-based company's adjusted earnings were $2.35 per share, up 4% from the year-ago quarter. Analysts had anticipated earnings of $2.23 per share. Revenue of $1.97 billion in the third quarter dropped 2% as compared to the same period last year and was roughly in line with estimates.
Segment performance
Sales in the U.S. Retail Pet Foods segment plunged 5% on a year-over-year basis to $721.9 million owing to poor sales of private label products and the Natural Balance brand. Profit declined by $1.9 million due to lower volume mix.
In the U.S. Retail Consumer Foods division, sales improved 0.05%, or $0.2 million, thanks to higher volume mix driven by strong perfomance of the Smucker’s Uncrustables and Jif brands. Excluding the impact of discontinuation of Jif Power Ups, segment profit dropped $4.2 million. Profit was hit by lower pricing that was only partially offset by higher volume mix.
Net sales in the coffee business declined by $2.8 million courtesy of lower net price realization from the Folgers and Dunkin’ Donuts brands. By contrast, profit climbed $5.8 million on the back of a favorable volume mix.
In the overseas market, the company’s sales increased $0.1 million thanks to the positive impact from the foreign currency exchange, which was partly offset by lower net price realization and lower volume mix.
Key takeaways from the quarter
The company saw low demand for the premium dog foods during the quarter. However, the rest of the offerings in the portfolio helped the company to lift sales up. CEO Mark Smucker said:
“Q3 results were in line with our expectations, benefiting from continued investment in our strategic growth imperatives and the decisive actions we are taking to improve certain areas of the business. Net sales performance reflected strong growth for the Smucker’s Uncrustables brand and improved volume fundamentals for our coffee and peanut butter brands, which supported market share and household penetration growth in both categories.”
Outlook
The company has provided fiscal 2020 guidance. Adjusted earnings are projected to be between $8.10 and $8.30 per share for the year, which is the same as its previously forecasted range. Smucker is expecting a top-line decline of 3%. Free cash flow is expected to be approximately $850 million.
Disclosure: I do not hold any positions in the stocks mentioned.
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