J.M. Smucker Profit Rises, But Results Miss Estimates; Cuts FY14 View

(RTTNews) - Branded food products maker J.M. Smucker Co. (SJM) Friday reported a higher third-quarter profit, reflecting improved margins, despite 6 percent fall in sales. Earnings per share, as well as revenues missed analysts' expectations. The company also lowered its outlook for fiscal 2014.

Looking ahead, the firm expects its fourth quarter to be down compared to a strong quarter last year, but said it is optimistic about its prospect for growth in the new fiscal year.

The company said its overall retail business was solid for the quarter led by volume growth in U.S. retail coffee, its largest business segment. U.S. Retail Coffee profit margins were 31.5 percent, up from 27.9 percent in fiscal 2013.

J.M. Smucker noted that its recent-quarter results included operations of Enray Inc., since the completion of its acquisition on August 20, 2013, and the impact of the firm's licensing and distribution agreement with Cumberland Packing Corp., which commenced on July 1, 2013.

For the third quarter ended January 31, 2014, the company posted net income of $166.7 million or $1.59 per share, higher than $154.2 million or $1.42 per share in the prior year.

Excluding special project costs, adjusted earnings per share were $1.66, while the company posted $1.47 per share last year.

On average, 16 analysts polled by Thomson Reuters expected the company to earn $1.68 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter declined 6 percent to $1.47 billion from $1.56 billion a year earlier. Twelve analysts had consensus revenue estimate of $1.53 billion for the quarter.

According to the company, the sales decline was mainly due to the impact of a 6 percent reduction in net price realization reflecting price declines taken since the beginning of the third quarter of 2013, notably on coffee and peanut butter.

Net sales in U.S. Retail Coffee segment fell 8 percent, U.S. Retail Consumer Foods sales were down 4 percent, and International, Foodservice, and Natural Foods showed a sales decline of 6 percent.

A combined $23.7 million from the acquired Enray business and the Cumberland distribution agreement contributed positively to net sales in the recent quarter.

Operating margin improved to 18 percent from 16.6 percent last year.

For fiscal 2014, the company now expects non-GAAP earnings per share to be in the range of $5.55 to $5.60, excluding special project costs of approximately $0.20 per share. Earlier, the company forecast non-GAAP earnings of $5.72 to $5.82 per share.

The company also lowered its net sales projection for fiscal 2014 to reflect a 5 percent decrease from 2013. The firm said in November that it expected net sales for the year to decrease by about 2 percent from last year.

Street currently is looking for fiscal 2014 earnings of $5.78 per share, on revenues of $5.78 billion.

SJM closed Thursday's regular trading session at $95.14, up 1.53 percent.