The J.M. Smucker Company (SJM) is seeing big profits from its iconic brands, especially the Folgers coffee line, which was acquired in late 2008. Smucker recently reported a record fourth quarter and raised fiscal 2010 guidance. The company has surprised on estimates 4 quarters in a row by an average of 20.38%.

Company Description

Smucker markets and manufactures a variety of food products including fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods and beverages.

The company has many iconic brand names including Jif, Crisco, Eagle Brand, and Hungry Jack. The company added the Folger coffee brand to its line-up in Nov 2008.

Record Fourth Quarter Results

On June 18, the J.M. Smucker Company did what many companies have failed to do during this recession and that is increase sales. The company also surprised on estimates by 67.21%, or 41 cents, reporting $1.02 compared to 61 cents expected by analysts.

Net sales for fiscal 2009 fourth quarter increased 81% to $1.068 billion from $590 million in the fourth quarter of 2008. The sales increase was fueled by strong sales of Folgers coffee, which the company acquired in Nov 2008.

For the other brands, pricing actions taken during the start of the downturn in 2008 drove sales. Some brands experienced volume increases Incorporatedluding Pillsbury baking mixes and frostings, Hungry Jack potatoes, pancakes and syrups and Eagle Brand condensed milk. Volumes declined in the oils category.

Peanut butter also continued to struggle due to the FDA recall of other peanut butter products which influenced consumers buying patterns of peanut butter earlier this year.

Folgers is a higher margin business and raised the company’s gross margin level. Folgers saw strong sales, favorable green coffee market conditions and positive product sales mix.

Fiscal 2010 Guidance Raised

The company is very bullish about fiscal 2010 and expects net sales to jump 20% over fiscal 2009.

Given the better than expected fourth quarter results, the company raised fiscal 2010 guidance to $3.65 to $3.80 from the prior range of $3.62 to $3.72 per share.

Estimates Rise to Match Guidance

The 2 covering analysts moved to raise estimates in the last week to match the company’s forecast as 2010 consensus estimates jumped to $3.72 from $3.39 per share.

Value Fundamentals

The J.M. Smucker Company is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 12.8 and a price-to-book of 1.14. The company also pays a dividend, with a current yield of 2.90%.

Zacks Investment Research
View original at: Zacks.com News Feed

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