J.M Smucker (SJM, Financial) recently released lackluster results. The company missed analysts’ estimates on both top and bottom lines. The company is worried about its performance in the future as it is seeing a challenging operating environment. The results were not received positively by investors and the stock fell by 1.75% soon after J.M. Smucker fell shy of analysts’ estimates.
The company ,however, posted a good 11% rise in the adjusted income per diluted share. In fact, J.M. Smucker is taking initiatives to regain its lost ground. There are some key points on the back of which J.M Smucker is thinking of a better performance in future. Let us have a look at some of its strategic moves.
Quarterly performance and beyond
In the recently reported quarter, J.M. Smucker posted revenue of $1.32 billion, which is not impressive compared to the same quarter a year ago. It missed analysts’ estimates of $1.36 billion. While on the earnings front, Smucker reported earnings of $116 million or $1.14 per share, which is lower than the $1.19 per share which it posted in the same quarter a year ago. In addition, the sales of the company also declined by 2%.
Things don't seem so smooth for Smucker. The company entered the new fiscal year with its financials falling short of consensus estimates. Even the declining sales is a matter of worry for J.M. Smucker. But the management of the company is still confident of better performance in future, as it thinks that its brands are well positioned in the market to perform well even in this challenging operating environment.
Smucker undertook aggressive promotional strategies for coffee, but the company’s sales fell by a slight 2%. But now there are various initiatives on which Smucker is focusing to improve its profitability in future.
Further, according to the latest updates from the U.S Department of Agriculture, the demand for coffee is expected to hit a record this year. Smucker is counting on this opportunity as the consumption of coffee is expected to grow at faster rate, especially in the countries that export coffee such as the U.S and Italy.
What next?
Smucker has recently announced an agreement to acquire the Sahale Snack business. With the growing snack business, Sahale will provide a new platform for growth. This will further add a portfolio of innovative and on trend premium fruit and nut snack. To support this, Smucker has also introduced some new products such as Jif To Go Dippers, which are also seeing good traction in the market and can be a growth driver in this category for Smucker in the future.
Smucker is counting on its Dunkin Donuts brand, which is also doing really well in the market. The company is pleased with the fantastic performance that it came up with in the first quarter. Smucker further expects that the addition of Cafe Bustelo brand at K-Cups will further add value to Smucker’s business in future.
Moving ahead, Smucker is worried about the weakness in its Pillsbury brand. To uplift this brand in the coming days, Smucker is focusing on frosting and other higher margin products as it enters the fall baking period. On the international front, the company saw a decline in the business due to weaker Canadian dollar. But with the expectations of rise in the coffee demand worldwide, Smucker is expecting its international sales to regain its lost ground.
Smucker is already pleased with a good start to a new fiscal year having achieved record non-GAAP earnings per share. The company is now focusing hard on building its brands from the profitability perspective by driving innovations and optimizing the supply chain. Smucker however is quite worried due to the challenging operating environment, still, the company thinks that its brands are well positioned to be competitive in even in this highly challenging operating environment.
Conclusion
Looking at the fundamentals, J.M. Smucker is cheap with trailing P/E of 18.94, however, the forward P/E of 15.87 also shows solid earnings growth in future. Thus, investors can consider the stock for the long run.
