Categories Analysis, Consumer, Retail

Earnings Preview: After two bad quarters, J.M. Smucker needs to deliver

It is difficult for an established company to hold investor confidence without delivering on the quarterly results, and J.M. Smucker (SJM) knows it too well. During the trailing two quarters, the food company reported disappointing results, missing analysts’ expectations on both revenue and income.

The poor results have weighed on the stock, which has been strictly trading sideways throughout this year. The stock is currently trading at $108.9, down 12% so far this year.

Analysts, meanwhile, remain slightly optimistic on the stock with an average 12-month price target of $113.17, which is at a 4% upside from the current trading price. Four out of the six analysts covering the stock has a HOLD rating, while two recommend BUY.

As J.M. Smucker reports results on November 28, Wednesday, analysts expect second-quarter earnings of $2.35 per share. During the same quarter last year, the company had earned $2.02 per share.

J. M. Smucker first quarter 2019 earnings

Meanwhile, revenue is estimated to grow by 6.5% to $2.05 billion. J.M. Smucker can hardly afford another earnings miss in the heels of two bad quarters.

Investors remain particularly concerned about the slowed earnings growth rate. Though the company acquired pet food company Ainsworth Pet Nutrition in May this year, it is yet to translate as an earning booster.

Analysts expect profits to improve 4% this year and a meager 1% next year. Note that it compares with the 10% earnings growths reported by the company during the past five years.

JM Smucker sheds baking brands to focus on pet foods, snacking

During the prior sequential quarter, J.M. Smucker had cut down its 2019 full year revenue guidance to reflect the impact of the divestiture of its US baking business. The company now expects net sales of $8 billion, compared to the prior estimate of $8.3 billion. Market pundits expect the company to reaffirm its revenue guidance this quarter.

 

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