J.M. Smucker (SJM) Reports Strong Fourth Quarter Earnings

J.M. Smucker (SJM) recently rallied on strong earnings last week. The maker of Smucker's jam, Jif peanut butter and Folgers coffee posted fourth quarter earnings of $1.22 per share, or $130.3 million, up from the $0.93 per share, or $104.1 million, it reported in the prior year quarter. While its earnings handily topped estimates by six cents, Smucker's sales slid 1.2% to $1.34 billion, merely matching the consensus estimate.

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Sales volume, however, rose 2% thanks to 6% growth in domestic retail coffee and a 4% gain in domestic retail consumer foods. The company's coffee, peanut butter and fruit jams were the company's most popular brands. However, Smucker lowered the price of its packaged retail coffee, which include Folgers and Dunkin' Donuts, by 6% during the quarter to increase lower-priced sales volume. Dunkin' Donuts was Smucker's leading coffee brand during the quarter, reporting 29% year-on-year sales growth. The company also released new flavors of K-Cups, for use with Green Mountain Coffee's (GMCR) best-selling Keurig single-serve brewers. In total, the company released 70 new products over the year, which it plans to top in fiscal 2014 with the launch of 100 new items across all food categories. COO Vincent Byrd noted that Smucker's strong revenue growth has been fueled by new product innovation, stating that "products launched during the past three years represented $530 million of fiscal 2013 net sales." Smucker also lowered the price of its peanut butter by 10% and fruit preserves by 11% due to lower commodity costs. The company is also investing heavily in marketing, spending 10% on marketing during the quarter to produce 25 new television commercials, new digital marketing initiatives, and other promotions. Peanut butter and jelly sandwiches, considered the traditional lunch of schoolchildren across the United States, are expected to generate higher demand for Smucker's core products during the back-to-school season. Smucker attributed its strong earnings growth to a jump in gross margins, which rose from 33.2% to 35.8%. This was aided by a 4.7% decline in input costs, thanks to declining commodity costs. CEO Richard Smucker was upbeat regarding the company's earnings report, stating, "Our momentum continued through a strong fourth quarter, as we achieved record sales, earnings, and operating cash flow for the full fiscal year." Smucker's cash flow from operations rose 17% year-on-year to over $850 million for the whole year, while free cash flow surged 40% to $650 million. To put this cash flow to good use, Smucker raised its annual dividend per share by 9% and spent $360 million to repurchase almost 4% of its outstanding shares. Looking forward, Smucker recently finished a $70 million expansion of its coffee-producing facilities in New Orleans, expanded its fruit spread manufacturing operations to a new factory in Orrville, and increased its bread-baking capacity. For the rest of the year, Smucker expects lower costs for coffee, peanuts and sweeteners, but higher costs for milk and flour products. Other News About SJM Peanut Costs to Weigh on Smucker's Margins in First Half Will peanut costs derail Smucker's growth? Smucker Fourth-Quarter Earnings Rise as Sales Fall Smucker's top line growth worries investors. Other Stocks in the News Pandora Flees From the iMonster and You Tunes Can Pandora survive the onslaught of Apple and Google? Is This the End of Zynga? Is it game over for Zynga? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jun 13, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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