J.M. Smucker Q3 Profit Rises, But Results Miss Estimates; Cuts FY14 Outlook

(RTTNews) - Branded food products maker J.M. Smucker Co. (SJM) reported that its third-quarter of fiscal 2014 net income increased to $166.7 million or $1.59 per share, from $154.2 million or $1.42 per share in the third-quarter of fiscal 2013.

Quarterly income, excluding special project costs, grew to $173.5 million from the prior year's $159.3 million, with adjusted earnings per share improving to $1.66 from $1.47 last year. Analysts polled by Thomson Reuters expected the company to report earnings of $1.68 per share for the quarter. Analysts' estimates typically exclude special items.

Income excluding special project costs increased 9 percent in the third quarter of 2014, compared to 2013, reflecting the increase in operating income and further impacted by lower interest expense. Third quarter income per share, excluding special project costs, increased 13 percent in 2014, compared to 2013, benefiting from the Company's share repurchase activities over the past year.

Operating income excluding the impact of restructuring, merger and integration, and certain pension settlement costs increased 3 percent in the third quarter of 2014, compared to 2013, reflecting gains in gross profit and lower corporate administrative expenses.

Net sales for the quarter declined 6% to $1.47 billion from last year's $1.56 billion, primarily 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. Twelve analysts had consensus revenue estimate of $1.53 billion for the quarter.

A combined $23.7 million from the acquired Enray business and the Cumberland distribution agreement contributed positively to net sales in the third quarter of 2014. The unfavorable impacts of mix and foreign exchange each reduced net sales by 1 percent in the third quarter of 2014, compared to the third quarter of 2013.

"While we expect our fourth quarter earnings to be down compared to a strong quarter last year, we want to reiterate that our business fundamentals remain sound and our prospects for ongoing earnings growth continue," said Richard Smucker, Chief Executive Officer.

The company lowered its fiscal 2014 non-GAAP income per share estimate to a range of $5.55 to $5.60, excluding special project costs of approximately $0.20 per share. The previous estimate was a range of $5.72 to $5.82.

The company reduced its net sales projection for fiscal 2014 to reflect a 5 percent decrease from 2013. The company 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 year 2014 earnings of $5.78 per share on annual revenues of $5.78 billion.

The company said that the updated guidance reflected its third quarter results including the unplanned trade spending accrual adjustment, lower volume expectations for the fourth quarter, a more competitive pricing environment in key categories, and foreign exchange headwinds.