Categories Analysis, Consumer

Key takeaways from JM Smucker’s (SJM) Q2 2024 earnings report

Adjusted EPS for the full year is now expected to range between $9.25-9.65

Shares of the J.M. Smucker Co. (NYSE: SJM) were up over 4% on Tuesday after the company reported its earnings results for the second quarter of 2024. Profits beat expectations but revenue fell short. The branded foods maker also revised its outlook for the full year in light of recent acquisitions and divestitures. Here are the key takeaways from the earnings report:

Mixed results

Net sales decreased 12% year-over-year to $1.94 billion, narrowly missing estimates of $1.95 billion. The decrease in the top line was mainly due to lost sales from the divested pet food business in the prior year. Comparable net sales increased 7%. GAAP EPS grew 6% to $1.90. Adjusted EPS rose 8% to $2.59, beating projections of $2.47.

Category performance

As stated on the conference call, in Q2, net sales in the Coffee business declined 3%, mainly due to a list price decline, as the company passed through the benefit of lower coffee costs to customers. The Café Bustelo, Folgers, and Dunkin brands performed well during the quarter with strong volume growth. SJM expects the momentum in the coffee business to continue through the back half of the year, with volume growth anticipated in the low single digits.

Within the Consumer Foods business, net sales increased 7%, fueled by growth in Uncrustables frozen sandwiches. Net sales for Uncrustables grew by 22% in Q2. The company expects the brand’s sales to grow by around 20% to over $800 million for the full year.

Sales in Pet Foods fell 39% in Q2. Excluding the pet food brands divestiture, comparable net sales rose 20%. Within this segment, the company saw strong growth for the Meow Mix cat food and Milk Bone dog snacks brands, with both posting double-digit increases in sales. Sales in the International and Away From Home segment grew 9% in the quarter.

Acquisitions and divestitures

JM Smucker continues to reshape its portfolio through acquisitions and divestitures. As part of these efforts, the company has divested its Sahale Snacks business and plans to do the same with its Canadian condiments business.

SJM also acquired Hostess Brands, which focuses on sweet baked snacks and cookies and owns brands such as Twinkies and Voortman cookies. This acquisition offers SJM a significant opportunity to expand in the rapidly-growing snacking market. This acquisition is expected to contribute approx. $1.5 billion in net sales, representing approx. 15% of SJM’s total portfolio going forward.

Revised guidance

JM Smucker revised its guidance for full-year 2024 to reflect its recent acquisitions and divestitures. The company expects net sales for the year to decrease approx. 3.0-3.5% year-over-year, reflecting total sales of $8.25 billion at the midpoint of the range. The guidance includes a $1.5 billion reduction in sales from the pet foods and Sahale Snacks divestitures, and a $650 million increase in sales from the Hostess acquisition.

Comparable net sales are now expected to grow around 8.5-9.0% versus the previous range of 8.5-9.5%. Adjusted EPS for the full year is now expected to range between $9.25-9.65 versus the prior range of $9.45-9.85. The earnings guidance includes negative impacts related to the pet food divestiture and the Hostess acquisition.

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