Branded food products maker JM SMUCKER (SJM, Financial) reported a third-quarter net income decline from $166.7 million to $160.9 million ($1.59 per share to $1.58 per share) in the prior year quarter.
Disregarding items affecting comparability, the quarter’s income was $156.3 million or $1.54 per share, compared to $170.8 million or $1.63 per share in the year-ago period. On average, Thomson Reuters polled 16 analysts who predicted earnings of $1.51 per share for the quarter. These estimates almost always exclude special items.
On-going Affairs
JM Smucker, who also sells Pissbury baking mixes and Crisco shortening, offered a bit of brighter news as well, stating it sold more jars of Jif peanut butter and Smucker’s fruit spreads in this quarter. Smucker also stated profit for the consumer food segment rose 9% for the January quarter.
Net sales for the quarter decreased 2% to $1.44 billion from $1.47 billion in the year-ago period. These net sales were hurt by decreased volume, and felt most in the US market’s retail coffee segment. Analysts predict revenues of upto $1.47 billion for the quarter coming up.
According to JM Smucker, their pending deal of acquiring Big Heart Pet Brands is expected to get finalised in the fourth quarter, though the company refrained from giving any formal update about its full-year earnings per share and free cash flow guidance.
‘While we are pleased with the momentum in many of our businesses, our US retail coffee business continued to be challenged, which impacted our third quarter performance. In the near term, we expect results for the coffee segment to remain soft reflecting continued competitive dynamics, which we are addressing responsibly to ensure the long-term health of our brands,’ said Richard Smucker, CEO.
On the other hand JM Smucker is providing selective forward-looking information with regards to its fourth quarter and a general overview of a full year 2015 earnings. The food products specialist will be publishing its outlook for fiscal 2016, which would include the impact of Big Heart Pet Brands, as part of its fourth-quarter earnings release which has been planned for June 2015.
Selling and distribution expenses dropped 5% or $13 million in the third quarter of 2015 compared to the third quarter of 2014. This was primarily due to an $18.7 million decrease in marketing expense. At the same time general and administrative expenses increased 10% in the third quarter of 2015, compared to to 2014, and included $4.4 million of deal costs related to the pending acquisitions of Big Heart Pet Brands.
JM Smucker anticipates a decent decrease in net sales for the fourth quarter compared to the same period last year before any impact of Big Heart Pet Brands. This means that the expected volume sales from its U.S. retail coffee segment would be lower than previously estimations.
Not taking into consideration the impact from the Big Hearts Pet Brands acquisition, JM Smucker expects fourth quarter earnings per share will drive the full year earnings per share downwards below the EPS median of its previous range of $5.45 to $5.65 by about 3%. Based on these fourth-quarter estimates, the company expects to realize a decrease in full fiscal year net sales of nearly 3% as compared to the prior year.
Takeaway
Investors should stay positive over JM Smucker stocks and the company expects to provide its outlook for fiscal 2016 and anticipates a modest decrease in net sales during the fourth quarter. This outlook outlines softer volume expectation in its US retail coffee segment than previously expected. The company expects only a drop of full fiscal year net sales of 3% which should start to rise almost immediately afterwards as the company begin retaking its share of the segment pie.
