The J.M. Smucker Company (SJM) reported strong first-quarter earnings, exceeding analyst expectations, but its shares traded lower on Wednesday after the company lowered its outlook for the fiscal year.
The company reported adjusted earnings per share of $2.44, a 10% year-over-year increase, beating the analyst consensus estimate of $2.17. Quarterly sales reached $2.125 billion, an 18% year-over-year increase, but slightly missed the Street’s view of $2.133 billion.
“These results are driven by the focus we have established and progress we have made in delivering our core business, successfully integrating Hostess Brands, and achieving our goals for transformation, cost discipline, and cash generation,” said Mark Smucker, Chair of the Board, President, and Chief Executive Officer.
Gross profit rose by $142.4 million, or 22%, while adjusted gross profit increased $188.1 million, or 29%. The increase was largely attributed to the acquisition of Hostess Brands and positive volume/mix effects, though the impact of divestitures partially offset it. Operating cash flow was $172.9 million, down from $217.9 million in the prior year, primarily due to increased cash needed for working capital, though partially offset by higher net income adjusted for noncash items.
However, the company’s lowered outlook for the fiscal year weighed on the stock price. J.M. Smucker projects FY25 Adjusted EPS to range $9.60 to $10.00, compared to the prior estimate of $9.80 to $10.20 and the $10.03 estimate. The company also expects net sales growth of 8.5% to 9.5%, down from the previous range of 9.5% to 10.5%. Comparable net sales are expected to increase approximately 0.5%-1.5%.
“The updated net sales guidance reflects an ongoing dynamic consumer environment driven by inflationary pressures and diminished discretionary income affecting the dog snacks and sweet baked goods categories, and the anticipated impacts of elasticity of demand within our coffee portfolio due to additional pricing actions as a result of higher than expected green coffee costs, partially offset by increased expectations for Uncrustables sandwiches,” the company said.
Despite the lowered outlook, Smucker remains optimistic about its core business and integration of Hostess Brands. The company’s focus on transformation, cost discipline, and cash generation is expected to drive future growth.
SJM shares are trading lower by 4.59% to $115.16 at last check Wednesday.
