Coffee Service

JM Smucker beats Q2 2021 revenue and earnings expectations

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November 24, 2020

Net sales for J.M. Smucker Co. increased 4% from $1.95 billion in the 2020 second quarter to $2.03 billion in the 2021 second quarter ending Oct. 31, 2020, primarily due to favorable volume/mix for the company's U.S. retail coffee and U.S. retail consumer foods segments, reflecting elevated at-home consumption, partially offset by reduced volume/mix for its away from home operating segment, according to an earnings report.
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Net income per common share, assuming dilution, rose from $1.85 in 2020's second quarter to $2.02 in 2021, while adjusted earnings per share, assuming dilution, rose from $2.26 to $2.39.

Revenue surpassed expectations for U.S. coffee ($594.7 million versus $589.2 million), U.S. consumer foods ($478.1 million versus $468.6 million) and international away from home ($251.5 million versus $248.7 million), according to Seeking Alpha. Earnings per share beat market expectations by 16 cents.

Shares traded at $116.24 today against a 52-week range of $91.88-$125.62.

"In the second quarter, we focused on meeting the demands created by the current environment, while continuing to execute our long-term strategy to deliver sustainable growth," Mark Smucker, president and CEO, said in the earnings release. "Our U.S. retail consumer foods and U.S. retail coffee businesses experienced strong sales momentum from elevated at-home consumption trends and grew market share."

"We are pleased to raise our full-year financial guidance, while making additional investments in our brands to support their momentum," he said. "I am confident that we are strengthening our foundation to deliver both our short-term and long-term financial objectives and increase shareholder value."

Gross profit increased $64.2 million, or 9%, primarily due to a favorable change in unallocated derivative gains and losses as compared to the prior year and the increased contribution from volume/mix. Operating income increased $51.0 million, or 15%, primarily reflecting the increase in gross profit, partially offset by a $21.3 million increase in selling, distribution and administrative expenses.

Adjusted gross profit increased $33.6 million, or 4%, with the difference from generally accepted accounting principles results being the exclusion of unallocated derivative gains and losses. Adjusted operating income increased $17.8 million, or 5%, further reflecting the exclusion of other special project costs and amortization.

The outbreak of COVID-19 continues to impact financial results and cause uncertainty for the full-year fiscal 2021 outlook. Changes in consumer purchasing behavior, retailer inventory levels, macroeconomic conditions and any manufacturing or supply chain disruption could materially impact actual results.

Net sales are expected to increase 1% to 2% compared to the prior year, primarily reflecting elevated at-home consumption benefiting the U.S. retail coffee and U.S. retail consumer foods segments. Net sales guidance also reflects a decline for the company's away from home business and the lapping of a $185 million incremental benefit to net sales related to COVID-19 in the fourth quarter of the prior year.

Adjusted earnings per share is expected to range from $8.55 to $8.85, based on 114.1 million shares outstanding. Earnings guidance reflects the contribution from sales at a gross profit margin range of 37.5% to 38%, SD&A expenses to increase 1% to 2% compared to the prior year, and an effective tax rate of 24%. Free cash flow is expected to range from $975 million to $1.025 billion with capital expenditures of $315 million.

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