The J. M. Smucker Company (SJM, Financial) recently announced first quarter of fiscal 2015 net sales of $1,323.8 million, a decrease of nearly 2% from $1,350.9 million reported during the same period last year. For fiscal 2015, the company forecasts net sales to rise by slightly below 5 percent over 2014.
Earnings analysis
The J. M. Smucker Company reported first quarter of fiscal 2015 net income of $116.0 million or $1.14 per diluted share, a decrease of 8% from $126.6 million or 4% decrease from $1.19 per diluted share reported during first quarter of fiscal 2014. The company maintains its non-GAAP income per diluted share in the $5.95 to $6.05 range. Smucker missed the average analyst approximation given by FactSet of $1.37 a share and also missed the same analysts' expectation of Zacks Investment Research.
Outlook
J. M. Smucker achieved volume gains across several of its key categories and brands. In its coffee segment, volume increased by 2% due to robust performance of its Dunkin’ Donuts, Café Bustelo and Folgers brands.
Solid volume gains were witnessed within the consumer foods segment in a number of major categories such as Crisco oils, Smucker’s fruit spreads and Jif peanut butter.
There was considerable improvement in profit for the consumer food segment mainly due to the robust sales for peanut butter that resulted in impressive growth in operating income for the company. The non-GAAP earnings per share were also up by 11% to $1.34.
These company positives are supported by its strong ability to control its price to cost linkage, robust input from fresh product launches and innovation, its solid merchandising and marketing techniques, its continued investments to improve its supply chain and planned usage of its cash flow.
J. M. Smucker has also revealed plans to acquire the snack business of Sahale. This acquisition is believed to add several unique and best fruit and nut snacks to the company’s product portfolio. It also complements the new introduction of snacking items like the Jif To Go dippers.
J. M. Smucker achieved continued year-over-year volume growth in the U.S. with Retail Coffee highlighting expansion in all of its major coffee brands.
Increasing demand
According to the U.S. Department of Agriculture, the worldwide demand for coffee is believed to touch a record level this year. The International Coffee Organization also forecasts the coffee consumption to expand at twice the rate of many coffee exporting countries like Italy and the U.S.
The Folgers brand rose 2% during the quarter this year coupled with 4% rise witnessed last year primarily due to solid volume growth in ground coffee and normal roast. The Gourmet Selections K-Cup of Folger also illustrated healthy volume growth.
The volume for Dunkin’ Donuts coffee continuously increased by 3% compared to a solid 6% expansion last year. Additionally, the Cafe Bustelo brand generated impressive volume growth in double digits. The launch of Cafe Bustelo brand at K-Cups contributed to these solid results.
During the quarter, the company also decided to discontinue its Life Is Good coffee brand which led to a slight decline in the segment profit.
Smucker’s fruit spread volume increased 2% owing to the profits in regular offerings coupled with ongoing growth of its natural fruit spreads. Further within the brand, the starting performance of Smucker’s Fruit-Fulls is pleasing.
The Uncrustables frozen sandwich of Smucker recorded impressive volume growth in double digits under the retail category straight for the 10th consecutive quarter. The expansion of its manufacturing facility in Scottsville allows for the much required capacity to enable its growth efforts regarding this product line.
For the bake category, the Crisco brand depicted impressive volume growth during the quarter.
However, the Pillsbury brand suffered badly in the quarter with declining sales, reflecting downfall in the general category and pumped up competition in the flour and base cake items.
Entering into the Fall Bake period, Smucker is keenly focused on its efforts regarding the frostings and different superior margin products. Smucker is also excited about the fresh Pillsbury items on the verge of launch during the quarter.
In Natural Foods category, Smucker’s partner in China Seamild is progressing continuously and delivering solid growth thus contributing to its first quarter results.
Conclusion
Finally, investors are advised to invest in J. M. Smucker looking at the solid long-term growth prospects indicated by the CAGR for the next 5 years per annum of 7.60% comparable to the industry’s average of 13.28% and expect promising returns in a long run.
