Yahoo Finance The J.M. Smucker (SJM) Up More Than 15% in 6 Months: Here's Why
The J. M. Smucker Company SJM is well-positioned courtesy of strategic pricing actions. Strength in the company’s Away from Home division and Coffee business is yielding. The iconic food and beverages’ company is progressing well with core priorities.
The upsides mentioned above boosted its second-quarter fiscal 2023 results, with sales rising year over year and beating the Zacks Consensus Estimate. Impressively, management raised its fiscal 2023 net sales and earnings view.
This Zacks Rank #2 (Buy) stock has rallied 18.3% in the past six months compared with the industry’s 8.9% growth. The stock has outperformed the Zacks Consumer Staples sector, rising 4.7% in the period.
Let’s delve deeper.
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Solid Q2 Results & Raised View
In the second quarter of fiscal 2023, The J. M. Smucker’s net sales amounted to $2,205 million, which advanced 8% on the back of Pet and Coffee businesses and solid growth for the Uncrustables brand. Excluding non-comparable net sales related to divestitures and currency movements, net sales increased 11%. The uptick in comparable net sales can be attributed to the positive net price realization in all the company’s segments. Organic sales increased across all businesses, backed by the company’s portfolio strength and efforts to manage cost inflation and supply-chain headwinds.
Based on a strong performance and continued business momentum, management pulled up its net sales and adjusted earnings per share (EPS) views for fiscal 2023. For fiscal 2023, SJM anticipates net sales to rise 5.5-6.5%, up from the previous view of 4-5%. The adjusted EPS for fiscal 2023 is envisioned in the $8.35-$8.75 band, up from the earlier $8.20-$8.60 band. The bottom-line view reflects the positive impact of pricing and share buybacks (of the prior year), more than negated by inflated costs, an expected volume/mix effect of the price elasticity of demand, an adverse impact of the product recall and elevated SD&A expenses.
Pricing Actions Solid
The J. M. Smucker has been benefiting from positive net price realization, which was also witnessed in the second quarter of fiscal 2023, with higher net price realization contributing 17 percentage points to the top-line growth. Net sales growth was mainly backed by positive net price realization in the company segments. Management’s raised sales guidance for fiscal 2023 reflects the positive impacts of elevated net pricing to counter cost inflation in many categories.
Solid Away from Home & Coffee Business
The J. M. Smucker Company is gaining from strength in the International and Away from Home divisions. This was witnessed in second-quarter fiscal 2023, with net sales advancing 14% to $297.9 million. Excluding divestitures and currency headwinds, net sales rose 19% for the Away from Home division, driven by double-digit growth for coffee and Uncrustables sandwiches. The segment’s profit climbed 3% to $41.5 million, mainly reflecting a favorable net impact of positive net price realization and higher commodity costs somewhat offset by lower contribution from volume/mix.
Talking of the coffee business, the overall coffee portfolio looks encouraging as at-home coffee remains strong, despite inflationary pressures given consumers’ daily coffee habits. In the coffee category, net sales grew 10%, led by all brands in the market-leading at-home coffee portfolio during the second quarter of fiscal 2023. The company’s Café Bustelo and Folgers brands are doing well in the category.
Focus on Core Strategies
The J. M. Smucker is progressing well with core priorities, which include driving commercial excellence, reshaping its portfolio, streamlining cost structure and unleashing its organization to win. Strength in such strategies is helping the company navigate complex supply chain challenges. These are also helping the company improve in-store fundamentals and stock performance for the brands. The company is implementing inflation-justified pricing actions across all businesses. The company is committed to increasing its focus and resources to reshape its portfolio and achieve sustainable growth across pet food and snacks, coffee and snacking categories. Management has been optimizing its supply chain, lowering discretionary costs and expanding network production efficiencies to streamline costs.
We believe that well-chalked core strategies along with the above-mentioned upsides will likely keep SJM’s growth story going.
3 Solid Staple Picks
Some other top-ranked stocks are Conagra Brands CAG, Lamb Weston LW and Mondelez International, Inc. MDLZ.
Conagra Brands, operating as a consumer-packaged goods food company, currently sports a Zacks Rank of 1 (Strong Buy). CAG has a trailing four-quarter earnings surprise of 8.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 6.8% and 11.9%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, a leading global manufacturer, marketer and distributor of value-added frozen potato products, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 52.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales suggests growth of 20% and 79.3%, respectively, from the corresponding year-ago reported figures.
Mondelez International, which manufactures, markets, and sells snack food and beverage products, carries a Zacks Rank 2 (Buy). MDLZ has a trailing four-quarter earnings surprise of 6.4%, on average.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 8.7% and 2.4%, respectively, from the corresponding year-ago reported figures.
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Conagra Brands (CAG) : Free Stock Analysis Report
The J. M. Smucker Company (SJM) : Free Stock Analysis Report
Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
Lamb Weston (LW) : Free Stock Analysis Report
