J.M. Smucker (SJM) shares climbed Wednesday after the company delivered a fiscal first-quarter earnings beat that was hard to ignore. Adjusted earnings jumped 71% to $3.24 per share, crushing the $2.22 consensus estimate. Sales rose 5% year over year to $2.22 billion, also topping expectations of $2.13 billion.
What drove the numbers? Higher coffee prices added 4 percentage points to growth, while volume and product mix chipped in another point. Stronger Uncrustables sandwich and coffee volumes helped offset weaker demand for sweet baked goods and peanut butter.
The quarter also included an 84-cent-per-share benefit from tariff refunds. The company expects a full-year benefit of 60 cents per share, which it plans to reinvest in marketing and administrative expenses.
Adjusted gross profit climbed 28% to $950.2 million, and adjusted operating income jumped 46% to $540.7 million. But it wasn't all smooth sailing: mid-single-digit inflation, mainly from freight and commodity costs, continued to pressure the cost of goods sold.
On the balance sheet front, J.M. Smucker hit its 3-times leverage target ahead of schedule. Now it's evaluating share repurchases while still prioritizing debt reduction. Operating cash flow improved to $425.7 million from an outflow of $10.6 million a year earlier, and free cash flow rose to $337.3 million from negative $94.9 million.
Business Performance
Breaking down the segments, U.S. Retail Coffee sales increased 13%, driven by higher prices and growth from the Dunkin' and Café Bustelo brands. Segment profit rose $165.8 million, largely reflecting tariff refunds and stronger pricing.
U.S. Retail Frozen Handheld and Spreads sales rose 3%, supported by higher Uncrustables sales. Segment profit increased $15.4 million thanks to pricing, lower marketing expenses, and favorable volume and mix.
U.S. Retail Pet Foods sales grew 1% as stronger cat food demand offset increased trade spending on dog snacks. Segment profit fell $2.4 million due to higher costs and marketing expenses.
Away From Home sales increased 3%, led by Uncrustables sandwiches and fruit spreads. Segment profit rose $9.8 million, helped by tariff refunds and favorable volume and mix.
Sweet Baked Snacks sales fell 7% as lower snack cake and breakfast product volumes outweighed higher prices. Segment profit declined $4.3 million.
Outlook
During the earnings call, J.M. Smucker said it will not cut coffee list prices because commodity costs haven't fallen enough or stayed lower long enough to justify a reduction. Instead, the company is passing some savings to consumers through increased promotional activity.
The company raised its fiscal 2027 adjusted earnings guidance to $10.50 to $11 per share from $9.75 to $10.25. It also lifted its sales forecast to between $8.87 billion and $8.96 billion from $8.69 billion to $8.78 billion. Both forecasts exceeded analyst estimates of $10.05 per share and $8.76 billion, respectively.
J.M. Smucker expects fiscal 2027 sales to decline 1% to 2%, mainly due to lower pricing and flat volume and mix. The company also cited geopolitical, economic, policy, and consumer uncertainty.
Coffee volume is expected to decline by a low-single-digit percentage despite recent gains. Meanwhile, the company projects high-single-digit growth for Uncrustables, supported by additional production capacity and marketing.
SJM Price Action: J.M. Smucker shares were up 4.10% at $130.59 at the time of publication on Wednesday. The stock is trading at a new 52-week high.
