J.M. Smucker Tops Earnings Estimates Despite Jif Recall

© Reuters J. M. Smucker (SJM) Tops Earnings Estimates Despite Jiff Recall

By Sam Boughedda

J.M. Smucker Company (NYSE:SJM) gained at the start of Tuesday's session after the company posted earnings for its fiscal first quarter, topping earnings expectations.

The manufacturer of food products posted Q1 earnings per share of $1.67, $0.40 better than the analyst estimate of $1.27, while revenue came in at $1.87 billion versus the consensus estimate of $1.87 billion.

The company said it has worked well to navigate cost inflation, industry-wide supply chain challenges, and its Jif peanut butter recall during the quarter, which was the primary reason net income declined 12% YoY.

Looking ahead, J.M. Smucker raised its FY2023 EPS forecast to between $8.20 and $8.60, versus the prior expectation of $7.85 to $8.25. In addition, the company sees sales up 4% to 5% versus prior of 3.5-4.5%

Following the report, a Stifel analyst said in a note to clients that the company's earnings were well ahead of its estimate and consensus.

"Organic sales growth was up 4%, and would have been up 13% excluding the Jif recall, a stronger performance. While sales were stronger and pricing offset inflation, the gross margin was still down 340bps and slightly below our estimate, even as pricing accelerated in the quarter. Operating profit was down 17% including a 29% drag on EBITA from the Jif recall (65c EPS drag). Jif is expected to be an 80c drag on EPS now, up from 90c previously," said the analyst, who has a Hold rating and a $140 price target on the stock.

"The company raised its guidance, including a near 5% increase in EPS guidance. The stronger results should drive the shares higher, in our view, and likely in line with the increase in EPS guidance," he added.