The J.M. Smucker Up on Q4 Earnings Beat, Higher Volumes

The J. M. Smucker Company SJM posted fourth-quarter fiscal 2024 results, wherein the bottom line increased year over year and beat the Zacks Consensus Estimate. While the top line declined, the company witnessed an increase in comparable net sales due to the higher volume/mix and net price realization. Shares of the company rose 4.6% on Jun 6.
SJM's performance in the fourth quarter and the full year reflects the strength of its business and solid demand for its leading brands. Management attributed the company's success to superior execution and disciplined cost management, which were vital in a dynamic operating landscape. SJM's transformed portfolio, bolstered by the recent buyout of Hostess Brands, has set the stage for long-term growth across key platforms such as coffee, uncrustables frozen sandwiches, dog snacks, cat food and sweet baked snacks.
The J. M. Smucker intends to remain committed to investing in brands, capabilities and talented employees in fiscal 2025, staying confident about achieving long-term growth and boosting shareholder value.

Quarter in Detail

Adjusted earnings of $2.66 per share rose 1% year over year and surpassed the Zacks Consensus Estimate of $2.32.

Net sales amounted to $2,205.7 million, which fell 1% year over year, missing the Zacks Consensus Estimate of $2,247 million. Excluding noncomparable sales related to acquisitions and divestitures, as well as currency movements, net sales grew 3%. The uptick in comparable net sales can be attributed to the higher volume/mix (up 1%) and improved net price realization (up 2%).
The gross profit went up 15% due to increased net price realization, an improved volume mix, reduced costs and a positive impact of the Hostess Brands acquisition, partly negated by the impact of divestitures. The adjusted gross profit grew 15%. The adjusted operating income jumped 13% year over year to $461.6 million.

Segmental Performance

U.S. Retail Pet Foods: The segment's sales slumped 42% to $452.6 million. Excluding non-comparable net sales associated with the pet food brand divestiture, net sales surged 11%. The volume/mix had an 8-percentage-point positive impact on net sales, with the net price realization boosting the same by three percentage points. The segment's profit decreased 22% to $114.1 million.
U.S. Retail Coffee: The segment's sales fell 4% to $666.1 million on the negative impacts of the volume/mix and net price realization to the tune of 2% each. The segment's profit rose 5% to $210.3 million.
U.S. Retail Frozen Handheld and Spreads: Sales in the segment declined 1% to $450.5 million. Excluding noncomparable sales in the year-ago period related to the divested Sahale Snacks business, net sales grew 1%. The volume/mix hurt net sales by 3%, while the net price realization boosted net sales by four percentage points. The segment's profit tumbled 7% to $95.8 million.
Sweet Baked Snacks: Sales in the segment came in at $337 million, with the segment profit amounting to $70.2 million in the fourth quarter.
International and Away from Home: Net sales dropped 1% to $299.5 million. Excluding the impact of noncomparable net sales associated with divestitures and currency movements, net sales grew 8%. The volume/mix had a three-percentage-point positive effect, and the net price realization had a positive impact of five percentage points on combined segment net sales. The segment's profit increased 28% to $61.1 million.

Other Financials

The J. M. Smucker exited the quarter with cash and cash equivalents of $62 million, long-term debt (net of current portion) of $6,773.7 million and total shareholders' equity of $7,693.9 million.
Cash flow provided by operating activities amounted to $428.7 million for the three months ended Apr 30, 2024. Free cash flow was $297.5 million in the same time frame.
Free cash flow and capital expenditures are likely to be $900 million and $450 million, respectively, in fiscal 2025.

Fiscal 2025 Guidance

For fiscal 2025, SJM anticipates comparable net sales to increase nearly 1.5-2.5%.
Fiscal 2025 net sales are anticipated to increase 9.5-10.5%, including one full year of sales from the Hostess Brands acquisition.
The adjusted EPS for fiscal 2025 is envisioned in the $9.80-$10.20 band compared with the $9.94 recorded in fiscal 2024. The bottom-line guidance takes into account higher net sales, an adjusted gross profit margin of nearly 38% and a roughly 13% rise in SD&A expenses.
Shares of this Zacks Rank #3 (Hold) company have declined 1.8% over the past three months compared with the industry's decrease of 3.1%.

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