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Mayank Marwah
Mayank Marwah
Articles (994) 

What's Behind JM Smucker's Strong 2nd-Quarter Results?

The company raised its fiscal 2021 guidance

November 24, 2020 | About:

Jam manufacturer JM Smucker Co. (NYSE:SJM) released its second-quarter 2021 results before the opening bell on Nov. 24. The company's earnings and revenue surpassed FactSet consensus estimates and also improved year over year.

Quarter in a snapshot

The company's robust results were primarily driven by increased customer demand for non-perishables during the quarter.

The Orrville, Ohio-based company's adjusted earnings per share came in at $2.39, increasing 6% from the year-ago quarter. Analysts had anticipated adjusted earnings of $2.23 per share. Revenue of $2.03 billion surged 4% compared to the prior-year quarter and surpassed estimates of $2.01 billion.

Reflecting on the company's performance, President and CEO Mark Smucker said:

"In the second quarter, we focused on meeting the demands created by the current environment, while continuing to execute our long-term strategy to deliver sustainable growth. Our U.S. Retail Consumer Foods and U.S. Retail Coffee businesses experienced strong sales momentum from elevated at-home consumption trends and grew market share."

Segment performance

Sales in the U.S. Retail Pet Foods segment plunged $1.2 million as compared to the prior three-month period to $708.7 million as strong sales of private label products could not negate the decline in the Natural Balance brand. Additionally, lower net pricing hampered the segment's results. Profit decreased 9% to $124.9 million due to higher marketing expenses.

In the U.S. Retail Consumer Foods division, sales improved 12%, or $53 million, thanks to higher volume mix, driven by strong performance of the Smucker's Uncrustables and Jif brands. Profit increased by $43.9 million, reflecting a positive net impact of pricing and costs as well as higher volume mix.

Net sales in the coffee business rose 9%, or $51.3 million, due to strong growth of the Folgers and Dunkin Donuts brands. Profit climbed $19.6 million on the back of a favorable volume mix and lower selling, general and administrative expenses.

In the overseas market, the company's sales decreased 10%, or $26.9 million, owing to lower volume mix, resulting in an 11 percentage points decrease in net sales. The impact from foreign currency exchange was neutral. Profit fell by $10.9 million primarily due to mounting input costs.

Looking forward

Smucker has continued to witness heightened at-home consumption demand. On the other hand, foodservice products continue to see a lower demand. Coronavirus-related expenses have also affected the company's business.

The company has raised its fiscal 2021 guidance. However, the full-year guidance does not account for the Crisco divesture the company announced last month. Adjusted earnings for the full year are projected to be between $8.55 and $8.85 per share, compared with its previous forecast of $8.20 to 8.60 per share. Smucker is expecting revenue growth of 1% to 2%, which is up from the previously forecasted growth of 0% to 1%. Free cash flow is expected to range between $975 million and $1.03 billion, up from the previously forecasted $925 million to $975 million.

"We are pleased to raise our full-year financial guidance, while making additional investments in our brands to support their momentum," Smucker said. "I am confident that we are strengthening our foundation to deliver both our short-term and long-term financial objectives and increase shareholder value."

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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