The J.M. Smucker Company (SJM) delivered first-quarter fiscal 2013 adjusted earnings (excluding special project costs of 17 cents) of $1.17 per share, which exceeded the Zacks Consensus Estimate of $1.00 by 17%.
Earnings also surpassed the prior-year quarter's adjusted earnings of $1.12 per share. Robust sales growth and lower outstanding shares due to share buyback boosted the earnings.
Revenue Details
Net sales in the quarter increased 15% year over year to $1.36 billion compared with $1.18 billion a year ago. The results were in line with the Zacks Consensus Revenue Estimate. The year-over-year increase was primarily driven by volume gains on the back of product innovation and productivity initiatives.
The company completed its acquisition of the North American foodservice coffee and hot beverage business from Sara Lee Corporation on January 3, 2012. The acquisitions contributed 7 percentage points to net sales growth.
Volume excluding the impact of acquisition went up 2% in the reported quarter, on the back of higher volume gain of Jif peanut butter and Folgers coffee.
Margin Details
Excluding special project costs of $3.9 million, gross profit increased to $473.7 million compared with $441.5 million in the year-ago period. Gross margin contracted 250 basis points (bps) to 34.6% in the first-quarter of fiscal 2013 due to higher costs for green coffee and peanuts. Operating margin, excluding the impact of the project costs, contracted 140 basis points (bps) to 15.9%.
Segment Performance
U.S. Retail Coffee Market: The company’s biggest segment, U.S. Retail Coffee Market, reported a 4% increase in sales to $520.8 million, aided by increased volume and sales mix of K-Cups. Volume went up 5% in the first quarter on the back of volume gains of Folgers brand and Dunkin Donuts.
The segment’s operating margin contracted 366 bps to 24.3% in the quarter, high coffee costs.
U.S. Retail Consumer Foods: The U.S. Retail Consumer Foods segment’s sales rose 15% to $528.4 million, driven by higher price realization and favorable sales mix. Volume went up by 1% during the quarter.
The segment’s profit margin inflated 320 bps to 20.4% in the quarter, primarily due to price increases in peanut butter and benefit of unrealized mark-to-market adjustments on derivative contracts.
International, Foodservice and Natural Foods: Net sales in the International, Foodservice and Natural Foods segment increased 40% over previous year to $320.5 million. Volume increased by 4% in the quarter.
The segment’s profit margin declined 410 bps to 12.7% in the first quarter of fiscal 2013, partially reflecting higher supply chain costs and marketing expense.
Financial Updates
Cash and cash equivalents as of July 31, 2012 were $311.5 million versus $102.5 million as of July 31, 2011.
Long-term debt as of July 31, 2012 amounted to $2.0 billion, compared with $1.3 billion in July 31, 2011.
Fiscal 2013 Guidance
The company has maintained its sales guidance for fiscal 2013. Management expects its net sales to increase 7% over the prior-year period. The sales guidance reflects the expected net sales contribution from the Sara Lee business.
The fiscal 2013 adjusted earnings, excluding special project costs of 50 cents per share, are expected to range from $5.00 to $5.10 per share. The company expects the earnings to be at the higher end of its guidance range.
Zacks Rank
Currently, we hold a Zacks #3 Rank (short-term Hold rating) on Smucker which competes with Green Mountain Coffee Roasters Inc. (GMCR). Over the long term, we have a Neutral recommendation on the stock.
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment