Shares of The J.M. Smucker Company SJM reached a new 52-week high of $125.01 on Dec 24, 2015, driven by its efforts to boost profit, eventually closing at $124.78. In fact, shares have been gaining momentum since the company announced upbeat second-quarter fiscal 2016 results on Nov 19.
Growth Drivers
Smucker has recently announced certain managerial changes to ensure consistent growth over the long term.
Barry C. Dunaway has been appointed as the president of Big Heart Pet Food and Snacks division, effective Mar 1, 2016. The segment was added after the acquisition of Big Heart Pet Brands on Mar 23, 2015.
Mark R. Belgya was promoted to the position of senior vice president and chief financial officer. Dunaway and Belgya would contribute further to the success and growth of the leading food product manufacturer with their experience.
Encouragingly, Smucker posted better-than-expected results, primarily on the back of recent acquisitions, lower coffee costs and the launch of Dunkin’ Donuts K-Cup pods this May. Smucker licenses Dunkin’ Donuts from Dunkin’ Brands Group, Inc. DNKN.
Adjusted earnings of $1.62 per share exceeded the Zacks Consensus Estimate of $1.52 by 6.6% and increased 6% from the prior year. Adjusted earnings, excluding amortization, were $1.91, which increased 13% year over year backed by impressive top-line growth and improvement in operating profits.
Net sales jumped 40% year over year to $2.08 billion and matched the Zacks Consensus Estimate. The increase was driven by the Big Heart Pet Brands buyout and growth within the U.S. Retail Coffee segment. Favorable volume/mix also contributed.
Adjusted gross profit went up 48% owing to the addition of Big Heart and the Dunkin' Donuts K-Cup pod launch. Net price realization declined but was offset by a reduction in commodity costs.
Despite higher general and administrative expenses, adjusted operating profit increased a significant 36% to $303.1 million supported by the Big Heart acquisition.
Strong organic sales growth, product innovation and constant efforts to expand through acquisitions have been Smucker’s strengths. The recent acquisitions and the launch of Dunkin Donuts K-Cup pods are expected to further aid the top line in fiscal 2016. Moreover, lower coffee price and higher sales of Dunkin Donuts K-Cup pods should boost coffee volumes in the near term.
However, currency headwinds and intensifying competition in the pet food business remain the concerns for this Zacks Rank #3 (Hold) company.
Meanwhile, investors may have a look at these better-ranked food stocks such as Omega Protein Corp. OME and B&G Foods, Inc. BGS, both sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment