Smucker's Tops, Outlook Upbeat

 |  About: J. M. Smucker Company (SJM)
by: Zacks Investment Research

The J. M. Smucker Company (NYSE:SJM), a leading marketer and manufacturer of processed and packaged goods, announced its solid fourth quarter and fiscal year earnings results.

Smucker posted earnings of $1.07 for the reported quarter, exceeding the Zacks Consensus Estimate by 27 cents and fourth quarter 2009 by 5 cents. In addition, fiscal 2010 earnings of $4.37 surpassed the Zacks Consensus Estimate by 20 cents and fiscal 2009 earnings by 61 cents.

For fiscal 2011, the company forecasts earnings of $4.50 – $4.60 a share. This excludes restructuring and merger along with integration costs, but includes intangible asset amortization. The guidance is higher than the Zacks Consensus Estimate of $4.42 per share for the fiscal year. Shares of the company have gained more than 6% in Thursday trading on the NYSE as investors cheered the news.

Headquartered in Orrville, Ohio, Smucker posted flat year-over-year net sales of $1,069.1 million for the quarter, but for the fiscal year 2010 net sales jumped 23% to $4,605.3 million compared with fiscal 2009. The quarter experienced solid sales growth of U.S. Retail Consumer Market business, offsetting negative U.S. Retail Oils and Baking Market, and the U.S. Retail Coffee Market sales growth, resulting in a 1% annual volume decline. Excluding revenue from acquisitions, Smucker expects net sales to grow 3% year-over-year in fiscal 2011.

Gross margin for the quarter and fiscal 2010 expanded 280 basis points (bps) and 550 bps year-over-year to 40.2% and 38.8%, respectively. The quarter under review benefited from declining manufacturing and raw material costs compared with fourth quarter 2009.

Furthermore, the operating margin grew 220 bps and 520 bps annually to 16.9% and 17.2% in the fourth quarter and fiscal 2010, respectively.

Smucker ended the year with cash and cash equivalents of $283.6 million compared with $456.7 million at the end of fiscal 2009. Compared with fiscal 2009, net cash from operating activities increased to $713.5 million, primarily due to net income growth and improved working capital management. For the year under review, the company incurred a capital expenditure of $137.0 million and generated free cash flow of $576.5 million.

Concurrent with the company’s long-term investment plan to optimize production capacity and reduce its cost structure, Smucker restructured its coffee and fruit spreads operations in the reported quarter.

Industry leader Smucker remains committed to its long-term strategic objectives of 6% annual sales growth and greater than an 8% earnings growth, excluding charges.