December 2, 2020

Smucker (SJM) Looks Poised on Solid Demand & Online Business

The J. M. Smucker Company SJM is in solid shape, courtesy of rising demand stemming from increased at-home consumption amid the coronavirus outbreak. Apart from this, the company’s strategic buyouts and partnerships along with focus on e-commerce business bode well. Also, its robust cost-saving efforts are noteworthy.

Let’s dive deeper.

Coronavirus-Led Demand & Impressive Outlook

Burgeoning demand amid coronavirus pandemic have bolstered the company’s first-quarter fiscal 2021 results with the top and the bottom line advancing year over year and beating the Zacks Consensus Estimate. Notably, sales rose almost 11% on the back of favorable volume/mix in all retail businesses stemming from higher at-home consumption amid the pandemic.

Impressed with fiscal first-quarter results, management raised its fiscal 2021 net sales and adjusted earnings per share (EPS) outlook. Smucker expects net sales to range from flat to 1% growth. The top-line view reflects escalated at-home consumption as well as re-stocking of retailer inventory in the fiscal first quarter. Adjusted EPS for fiscal 2021 is anticipated in the range of $8.20-$8.60.

Analysts seem optimistic regarding the stock’s performance. Incidentally, the Zacks Consensus Estimate for fiscal 2021 earnings moved up 5.9% to $8.67 in the past 30 days.

Other Growth Drivers

Growing trend of online customers has urged Smucker to take notice of its e-commerce channel to boost sales. In fact, e-commerce is a fast-growing retail channel of the company. In the digital realm, pet business has been steadily expanding. During the fiscal first quarter, overall e-commerce sales have surged 70% year over year. Management expects to witness continued strength in the e-commerce channel in the forthcoming periods as consumers adapt to online shopping amid the pandemic. Moreover, the company is utilizing the digital platform to enhance consumer engagement.

Smucker actively pursues strategic acquisitions to boost growth. Notably, the company’s acquisition of Ainsworth (completed in May 2018) is driving performance in the U.S. Retail Pet Foods category. Other noteworthy acquisitions of the company include; Big Heart Pet Brand (pet food maker) and Sahale Snacks (branded nut and fruit snacks maker)among others. These acquisitions have added iconic brands to the company’s portfolio and strengthened its presence.

Also, Smucker formed key partnerships with quite a few coffee companies. Its agreement with Keurig Green Mountain (KGM) and Dunkin’ Brands Group, Inc, to manufacture and sell the K-Cup category of products are noteworthy.

Apart from these, Smucker resorts to cost savings to fuel investments and enhance operating performance. Impressively, adjusted gross profit increased 13% and adjusted gross margin expanded 80 basis points (bps) in the fiscal first quarter. Also, adjusted operating income increased 39%, while adjusted operating margin expanded 420 bps.

Is all Rosy for Smucker?

While coronavirus-led increased stay-at-home trends boosted Smucker’s retail business, the same dealt a blow to its International and Away From Home. Segmental net sales declined 9% year over year in the fiscal first quarter. Apart from this, lower net price realization coupled with escalated costs is a concern.

Nevertheless, the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company remain in investors’ good books. Notably, shares of the company have gained 7.6% so far this year against the industry’s decline of 3.6%.

3 Better-Ranked Food Stocks

The Hain Celestial HAIN, with a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 15.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

B&G Foods BGS, with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 6.9%, on average.

TreeHouse Foods THS, with a Zacks Rank #2, has a long-term earnings growth rate of 7.7%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, SherazMian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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