J.M. Smucker stock jumps 5% on earnings beat, guidance rise

Key points

• J.M Smucker stock rose 5% Tuesday after it topped earnings estimates.

• The food company also raised its guidance.

• Is J.M. Smucker stock a buy?

This food company got a boost from the recent acquisition of a household brand.

J.M. Smucker (NYSE: SJM) stock was rising on Tuesday after the maker of jams, jellies and other food products reported better than anticipated fiscal second quarter results.  

The company posted net sales of $2.3 billion, up 17 percent, which was in line with analysts’ expectations.

Smucker reported a net loss of $25 million in the quarter, or -23 cent per share, but that was mainly due to costs associated with acquisitions and divestures. On an adjusted basis, income rose 11% year-over-year to $294 million, or $2.76 per share, which topped consensus estimates of $2.51 per share.

The stock price was up about 5.5% on the news, trading at roughly $120 per share. The stock is down about 5% year-to-date.

Uncrustables, Meow Mix, boost revenue

Smucker is perhaps most well-known for its brand of jams and jellies, but it also owns a wide mix of snacks and pet food products that are also household names.

In the fiscal second quarter, sales were driven by increases for the Uncrustables brand of sandwich snacks, as well as Meow Mix pet food, Café Bustelo coffee, Folgers coffee, and Jif peanut butter.

The company has five food segments, with its largest being U.S. Retail Coffee, which generated $704 million in sales, an increase of 3%. It had a profit margin of 28.8%, up 390 basis points (bps) year-over-year.

Its next largest, U.S. Retail Frozen Handheld and Spreads, made $485 million in revenue, up 5%, but its profit margin dropped 380 bps to 23.9% due to higher marketing costs and expenses related to a new Uncrustables manufacturing facility.

Pet Foods saw sales drop 6% to $445 million despite sales increases in Meow Mix and Milk Bone dog food. This was mainly due to sales declines related to pet food brands it recently divested. But that helped the profit margin rise 640 bps to 27.3%.

Its newest business, Sweet Baked Snacks, comes from its acquisition of Hostess Brands, makers of Twinkies, Ding Dongs, and Ho Hos, among others, in late 2023. This business made $315 million in sales with a profit margin of 22.4%.

The other segment is International and Away from Home, which did $321 million in revenue, down 1% year-over-year. The profit margin jumped 270 bps to 21.2%.

Growing the Hostess Brand

In recent quarters, Smucker has been refocusing its business on growth areas and selling off underperforming brands. A key part of this strategy was buying the Hostess snack food brand.

“Looking ahead, we are focused on delivering our strategic priorities, including the integration of Hostess Brands, and are taking decisive actions to grow the Hostess brand,” Chair, President and CEO Mark Smucker said. “This includes the recently announced divestiture of the Voortman business, which highlights our strategy of prioritizing resources to our largest growth opportunities. We remain confident in the Hostess brand and its contribution to our long-term growth objectives.”

That is reflected in Smucker raising its adjusted earnings outlook for fiscal 2025, to a range of $9.70 to $10.10 per share, up from the previous range of $9.60 to $10.00. Net sales are expected to rise 8.5% to 9.5% for the year, which is the same as the previous guidance.

Is Smucker stock a buy?

Smucker got a price target raise to $130 per share from Jefferies, which would suggest an increase of 8%. But overall, analysts are not bullish on the stock. It has a median target of $122 per share, which is just 2% higher than the current price.

Smucker is an excellent dividend stock though. It has raised its dividend for 24 straight years, putting it on the cusp of becoming a Dividend Aristocrat. It currently has a dividend of $1.08 per share at a better than average 3.80% yield, with a solid payout ratio of 42%.

The stock is fairly cheap, trading at 16 times earnings, but it is not really in value stock territory. J.M. Smucker is a good, dependable dividend stock with modest, steady returns that has been a good defensive play in down markets.

If you are looking for that type of stock, it might be one to consider, but don’t expect huge upside.