The J. M. Smucker Company SJM posted robust second-quarter fiscal 2025 results, wherein both the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. Shares of the company rose nearly 6% in the pre-market trading session on Tuesday.
The company's strong fiscal second-quarter performance reflects the resilience of its categories and the effective execution of key growth strategies. Organic net sales and earnings growth were driven by strong contributions from brands such as Uncrustables, Meow Mix, Cafe Bustelo and Jif.
The company remains committed to delivering on its strategic priorities, including the integration and growth of Hostess Brands. The recent decision to divest the Voortman business further underscores the strategy of channeling resources toward the most significant growth opportunities.
SJM’s Quarterly Performance: Key Metrics and Insights
Adjusted earnings of $2.76 per share improved 7% year over year and surpassed the Zacks Consensus Estimate of $2.51.
The J. M. Smucker Company Price, Consensus and EPS Surprise
The J. M. Smucker Company price-consensus-eps-surprise-chart | The J. M. Smucker Company Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net sales amounted to $2,271.2 million, which jumped 17% year over year while beating the Zacks Consensus Estimate of $2,267 million. Excluding acquisitions, divestitures, as well as currency movements, net sales grew 2%. The uptick in comparable net sales can be attributed to the higher volume/mix (up 2%) and net price realization (up 1%).
The gross profit went up 22% due to the improved volume mix, better net price realization, reduced costs and a positive impact of the Hostess Brands acquisition, partly negated by the impact of divestitures. The adjusted gross profit grew 17%.
The adjusted operating income jumped 27% year over year to $490.6 million.
Decoding SJM’s Segmental Performance
U.S. Retail Pet Foods: The segment’s sales fell 4% to $445.4 million. The volume/mix and net price realization had a two-percentage-point adverse impact each on net sales. The segment’s profit surged 25% to $121.4 million.
U.S. Retail Coffee: The segment’s sales grew 3% to $704 million, backed by higher net price realization, while volume/mix remained neutral. The segment’s profit rose 19% to $202.7 million.
U.S. Retail Frozen Handheld and Spreads: Sales in the segment increased 5% to $485.2 million. Excluding noncomparable sales in the year-ago period related to the divested Sahale Snacks business, net sales grew 6%. The volume/mix boosted net sales by 8%, and the net price realization lowered net sales by 2%. The segment’s profit tumbled 10% to $116.1 million.
Sweet Baked Snacks: Sales in the segment came in at $315.5 million, with the segment profit amounting to $70.6 million in the quarter.
International and Away from Home: Net sales dropped 1% to $321.1 million. Excluding the impact of noncomparable net sales associated with divestitures and currency movements, net sales grew 6%. The volume/mix had a two-percentage-point positive effect, and the net price realization had a positive impact of four percentage points on net sales. The segment’s profit increased 13% to $68 million.
SJM’s Financial Health Snapshot
The J. M. Smucker exited the quarter with cash and cash equivalents of $49.2 million, long-term debt (net of current portion) of $6,776.8 million and total shareholders’ equity of $7,633.1 million.
Cash flow provided by operating activities amounted to $404.2 million for the three months ended Oct. 31, 2024. Free cash flow was $317.2 million in the same time frame.
Free cash flow and capital expenditures are likely to be $875 million and $450 million, respectively, in fiscal 2025.
What to Expect From SJM in Fiscal 2025?
For fiscal 2025, SJM anticipates comparable net sales to increase by nearly 1-2% compared with the earlier view of 0.5-1.5%. This view also includes a decrease of $100 million contract manufacturing sales associated with the divested pet food brands.
Fiscal 2025 net sales are still anticipated to increase 8.5-9.5%. The adjusted EPS for fiscal 2025 is now envisioned in the $9.70-$10.10 band, up from the $9.60-$10 band range expected before. The company recorded an adjusted EPS of $9.94 in fiscal 2024. The bottom-line guidance takes into account an adjusted gross profit margin of 37.5%-38% and a roughly 9% rise in SD&A expenses. The company had earlier expected the adjusted gross margin to be 37.5%.
Management’s fiscal 2025 guidance does not incorporate any effects from the previously announced deal to offload the Voortman business. This transaction, anticipated to close in the third quarter of fiscal 2025, is expected to impact fiscal 2025 net sales by approximately $65 million and adjusted earnings per share by around 10 cents. The company plans to allocate the proceeds toward debt reduction and projects that the earnings impact will remain negligible to the fiscal 2025 adjusted EPS guidance range.
Shares of this Zacks Rank #3 (Hold) company have risen 3.5% over the past six months against the industry’s decline of 4.5%.
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