Smucker's Profit Tops Estimates, Boosts Outlook Despite Weaker Sales

(RTTNews) - Jelly maker J.M. Smucker Co. (SJM) reported Wednesday a profit for the first quarter that increased 14 percent from last year, despite a sales decline, reflecting improved margins amid lower commodity costs. Both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also raised its earnings guidance for the full-year 2014, while trimming annual sales outlook.

"There is clearly momentum across our business as we experienced our strongest first quarter earnings ever. Our team continues to execute well against our long-term strategy leading to strong results," CEO Richard Smucker said in a statement.

The Orrville, Ohio-based maker of Smucker's jams and Folgers coffee reported net income of $126.6 million or $1.19 per share for the first quarter, higher than $110.9 million or $1.00 per share in the prior-year quarter.

Excluding special project costs, adjusted net income for the quarter was $131.5 million or $1.24 per share, compared to $129.4 million or $1.17 per share in the year-ago quarter.

On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $1.20 per share for the quarter. Analysts' estimate typically excludes one-time items.

Net sales for the quarter edged down 1 percent to $1.35 billion from $1.37 billion in the same quarter last year, but topped eleven Wall Street analysts' consensus estimate of $1.34 billion by a whisker.

The sales decline was primarily attributable to a 4 percent reduction in net price realization amid price declines taken over the past twelve months, notably on coffee and peanut butter.

U.S. retail coffee net sales edged down 1 percent to $514.4 million, while U.S. retail consumer foods net sales edged up 1 percent to $536.4 million from the year-ago quarter. International, foodservice, and natural foods net sales declined 6 percent to $300.1 million from last year.

The company noted that overall volume increased 1 percent, driven by increases of 4 percent in both the U.S. retail coffee and U.S. retail consumer foods segments. Volume gains were particularly seen in Jif peanut butter, Crisco oils, and Folgers coffee.

"We experienced solid volume growth across a majority of our key categories during the quarter. Consumers have responded very well to our new product innovation, marketing, and merchandising activities," President and COO Vince Byrd stated.

Operating income margin expanded 190 basis points to 15.8 percent from last year's 13.9 percent as gross profit margin improved 220 basis points from last year amid lower commodity costs, favorable mix, and an increase in volume.

Overall commodity costs were lower during the quarter, due primarily to green coffee. The benefit of lower commodity costs was partially reduced by price declines taken over the past year.

Looking ahead to fiscal 2014, the company raised its guidance for adjusted earnings to a range of $5.72 to $5.82 per share from the prior forecast of $5.65 to $5.75 per share. The company now expects sales to decline about 1 percent from the $5.9 billion generated in 2013, implying sales of about $5.84 billion, down from the previous projection for flat sales.

Street is currently looking for full-year 2014 earnings of $5.79 on annual revenues of $5.88 billion.

"As commodity costs have moderated, we have been able to give consumers even greater value and the response has been favorable. We look forward to carrying this momentum into the back-to-school and holiday merchandising seasons," Byrd added.

SJM closed Tuesday's regular trading session at $109.10, up $0.12 on a volume of 0.83 million shares. In the past 52-week period, the stock has been trading in a range of $81.60 to $114.72.