J.M. Smucker beats in Q3, but there are concerns about guidance

Posted Feb 26th 2009 4:15PM by Steven Mallas
Filed under: Earnings Reports

J.M. Smucker (NYSE: SJM) reported earnings for Q3 on Wednesday. The company, which makes defensive-type products such as peanut butter, jelly, and biscuits, reported a net sales increase of 6%, once you strip away the effect of acquisitions -- most notably the Folgers purchase -- and the effect of foreign exchange. On an adjusted basis, J.M. Smucker increased its bottom line by 11% to $0.88 per share. This source says that management beat estimates by two pennies, although other sources, such as this one, says the beat was by a single penny.

Either way, we'll put J.M. Smucker down as beating Wall Street. Should we jump up and down for joy? Not necessarily. Looking through the release, I see that the company did pretty well. The Folgers buy should benefit shareholders over time. It certainly helped the statement of cash flows during the quarter. There is a problem, though. Guidance isn't too rosy, given the fact that we are currently in the throes of a peanut-butter scare. We've all heard about it, and even though the crisis centers on institutional products, consumers are apparently cutting back on the safe stuff, too. That's a shame for J.M. Smucker. It's also a shame for any company that uses peanut butter. Kellogg (NYSE: K) recently had to pull some products, and although Hershey (NYSE: HSY) hasn't had any problems with its portfolio in terms of contamination (the company has stated that all of its products are fine), I know I am avoiding Reese's items myself.

Elizabeth Harrow talked about an upgrade for J.M. Smucker at the end of January. At that time the stock was exhibiting some technical strength. Now, though, it's close to a 52-week low. Personally, I'd avoid the stock at this time. With the shares being weak, and since concern over peanut butter is still a national issue, I see no reason to invest in this name.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: food, Hershey, HSY, inthenews, j.m. smucker, J.m.Smucker, K, Kellogg, peanut butter, PeanutButter, reeses peanut butter cup, ReesesPeanutButterCup

Print this

Reader Comments (Page 1 of 1)

2-26-2009 @ 5:21PM

Eli Gundry said...

I live in Orrville, Ohio, where they started and their first factory is and regardless of what you say, they are the only company in the area still hiring amidst this terrible climate. I'd love to work there.