Earnings preview: High costs could continue to be a challenge for J.M. Smucker in Q1

The J.M. Smucker Company (NYSE: SJM) is scheduled to report first quarter 2020 earnings results on Tuesday, August 27, before the market opens. Analysts expect the company to report earnings of $1.74 per share on revenue of $1.87 billion.

The topline results in the first quarter are likely to benefit from the acquisitions and partnerships that the company has forged over the past couple of months. On the flip side, divestitures of some products along with certain business divisions are likely to weigh on the numbers.

Higher costs remain a challenge for the company even as it continues to take measures to reduce expenses. These costs are likely to take a toll on the bottom line numbers in the first quarter. The company continues to invest in its brands across pet foods and coffee, in particular, and these investments are anticipated to drive growth going forward.

In the fourth quarter of 2019, J.M. Smucker topped earnings estimates but missed revenue expectations. Net sales rose 7% to $1.90 billion, led by the addition of Ainsworth and the company’s growth brands. Adjusted EPS grew 8% to $2.08.

Excluding certain items, net sales saw a decline and was negatively affected by foreign currency exchange and lower net price realization last quarter. The coffee and pet foods divisions recorded sales growth while the consumer foods and international divisions posted declines.

Also see: The J.M. Smucker Company Q4 2019 Earnings Conference Call Transcript

Looking ahead into full year 2020, the company expects net sales growth in the range of 1-2% and adjusted earnings in the range of $8.45-8.65 per share. On a comparable basis, net sales are expected to increase by more than 2%.

J.M. Smucker’s shares have gained 21% year-to-date and 5% in the trailing 52 weeks. The stock has an average price target of $117.

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