By Evie Liu
J.M. Smucker, the maker of Jif peanut butter and Uncrustables frozen sandwiches, is set to post earnings on Tuesday morning. Investors aren't optimistic about the results.
Packaged food companies are facing many headwinds this year, with consumers dialing back spending and shifting toward cheaper alternatives as inflation dents their budget. Healthier diets and appetite-suppressing drugs have further curbed demand.
For the second fiscal quarter ended in October, analysts polled by FactSet expect Smucker to post revenue of $2.27 billion, about 17% higher than a year ago -- largely thanks to its acquisition of Hostess Brands, the manufacturer of Twinkies, last year.
Smucker expects to see $100 million of cost savings by the end of fiscal 2026 as a result of the Hostess acquisition. But investors aren't so sure they'll see a profit boost soon.
For the October quarter, analysts expect Smucker earnings to decline 3% from last year to $2.51 per share. If they are right, it would be the company's first year-over-year earnings drop since the January quarter of 2023.
At Smucker's last earnings report in August, management noted the firm's Sweet Baked Snacks segment delivered lower-than-expected sales, as a slowdown in the convenience channel disproportionately impacted the Hostess brand.
"Consumers continue to be selective in their spending, a trend that is largely driven by inflationary pressures and diminished discretionary income," said CEO Mark Smucker on the earnings call.
At the time, Smucker cut its full-year sales outlook by one percentage point to a range of 8.5% to 9.5% growth. It also lowered its earnings guidance to a range of $9.60 to $10 per share, down from prior expectations of $9.80 to $10.20.
Smucker has been adjusting its portfolio to get rid of some underperforming or low-growth segments of its business. Over the past year, the company has divested from its Canada condiment business, mixed-nuts company, as well as some pet food brands.
Last month, Smucker said it is selling the Voortman cookie brand for $305 million, a valuation lower than the previously rumored $350 million. The deal suggests the company is feeling pressure from Hostess' weaker-than-expected sales trends, wrote BNP Paribas analyst Max Gumport in an October note.
As of Monday's close, the stock has dropped 10% year to date. The S&P 500 is up 26% this year.
Write to Evie Liu at evie.liu@barrons.com
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November 25, 2024 16:16 ET (21:16 GMT)
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