Smucker Exceeds, Ups EPS View - Analyst Blog
15 Febbraio 2013 - 2:30PM
Zacks
The J.M. Smucker Company (SJM),a leading
manufacturer of food products,reported better-than-expected third
quarter fiscal 2013 adjusted earnings (excluding special project
costs) of $1.47 per share. The results exceeded both the Zacks
Consensus Estimate of $1.37 by 7.3% and the prior-year adjusted
earnings of $1.22 per share by 20% on the back of robust sales
growth and lower share count due to share buybacks.
Revenue and Margin Details
Net sales in the quarter increased 6% year over year to $1.560
billion compared with $1.468 billion a year ago, driven by benefits
of acquisition and favorable sales mix. The acquisition of Sara Lee
business contributed $59.7 million to net sales growth.
The year-over-year improvement was also driven by volume gains
in the higher priced K-Cups coffee brand and peanut butter
business. The results were slightly above the Zacks Consensus
Estimate of $1.557 billion. Organic net sales grew 2% to $1.50
billion in the quarter.
The company acquired Sara Lee Corporation’s North American
foodservice coffee and hot beverage business in January last year.
Later in June, Sara Lee had become two independent companies after
the spin-off in May, with D.E MASTER BLENDERS 1753 focusing on the
international Coffee & Tea business, and Sara Lee’s North
American business was named as Hillshire Brands
Company (HSH), focusing on meat-centric food products and
foodservice operations.
Adjusted gross margin expanded 190 basis points to 34.5%, driven
by the acquired Sara Lee foodservice business, favorable mix and
lower green coffee costs which offset the impact from higher peanut
costs. Despite higher operating expenses, adjusted operating
margins increased 120 basis points to 17.1%, reflecting strong
sales.
Segment Performance
U.S. Retail Coffee Market: The company’s
biggest segment, U.S. Retail Coffee Market, reported a 2% decline
in sales to $627.7 million due to the impact of price declines
taken from the past year. The segment’s operating margin expanded
520 bps to 27.9% in the quarter as favorable mix and volume growth
more than offset the significant increase in marketing
expenses.
U.S. Retail Consumer Foods: U.S. Retail
Consumer Foods segment sales rose 4% to $581.3 million, driven by
higher price realization and favorable sales mix, which offset a 1%
decline in volume. The segment’s profit margin contracted 90 bps to
18.3% in the quarter, primarily due to increase in costs of peanut
butter. These were partially offset by higher price realization,
sales mix and a decrease in marketing and selling expenses.
International, Foodservice and Natural Foods:
Net sales in the International, Foodservice and Natural Foods
segment increased 28% from the previous-year quarter to $350.6
million, driven by acquisitions, favorable sales mix and higher
price realization. The segment’s profit margin contracted 10 basis
points to 14.2% in the third quarter of fiscal 2013 due to higher
raw material costs and higher distribution expenses.
Fiscal 2013 Guidance
Management raised its lower end of its earnings guidance,
excluding special project costs of 40 cents per share, to the range
of $5.17 to $5.22 per share compared with $5.12 to $5.22 per share
announced previously.
The company expects its fiscal 2013 net sales to increase 6%
over the prior-year period, reflecting the expected net sales
contribution from the Sara Lee food service business. The company
earlier expected growth of 7% over the fiscal 2012 period.
Our Take
We are encouraged with the company’s continued focus on its
brands through innovations and promotional offerings, strategic
acquisitions, improving volumes, and effective utilization of cash
through buybacks. The company is well positioned to drive profits
in the coming quarters.
Other stocks worth a look in the food products industry are
Flower Foods Inc (FLO) and J&J Snack
Foods Corp (JJSF), both of them carrying a Zacks Rank #1
(Strong Buy).
FLOWERS FOODS (FLO): Free Stock Analysis Report
HILLSHIRE BRAND (HSH): Free Stock Analysis Report
J&J SNACK FOODS (JJSF): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
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