Smucker's At 52-Week High On Strong Q4 Earnings & Volumes

Shares of The J.M. Smucker Company (NYSE:SJM) reached a new 52-week high of $147.19 on Jun 22, since the company announced upbeat fourth-quarter fiscal 2016 results on Jun 9. Shares of this food company eventually closed at $147.09.

Strong Results

J.M Smucker posted better-than-expected fourth quarter fiscal 2016 results, wherein both earnings and revenues beat the Zacks Consensus Estimate, primarily driven by gains from the acquisition of Big Heart Pet Brands, gains from canned milk divestiture and favorable volumes owing to lower green coffee costs.

Earnings of $1.86 per share were significantly better than a loss in the prior-year quarter owing to the benefit from Big Heart operations and a gain from the U.S. canned milk divestiture. Impressive top-line growth and improvement in operating profits also aided earnings growth.

Net sales in the fourth quarter increased 25% year over year to $1.81 billion. The increase was driven by the acquisition of Big Heart Pet Brands and contribution from Dunkin' Donuts K-Cup pods (launched in May 2015). Smucker licenses Dunkin’ Donuts from Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) .

The acquisition of Big Heart Pet Brands contributed $336.9 million to fourth quarter sales. Excluding Big Heart, the impact from foreign currency exchange, and the impact of the U.S. canned milk divestiture, net sales increased 5%.

The company witnessed a favorable volume/mix driven by the contribution from Dunkin' Donuts K-Cup pods. However, net price realization was slightly lower due to lower net pricing on coffee, which was mostly offset by increases in several other categories.

We note that strong organic sales growth, product innovation and constant efforts to expand through acquisitions have remained Smucker’s strong points. The recent acquisitions, the launch of Dunkin Donuts K-cup pods, expanding distribution for the Natural Balance pet brand are fueling sales and are expected to continue the trend in fiscal 2017. The divestiture of its US canned milk brands and operations to Eagle Family Foods Group will allow the company to focus on key brands and growth opportunities.

Encouragingly, the Zacks Rank #1 (Strong Buy) company is witnessing growth in coffee volumes owing to further lowering of coffee price and increase from sales of Dunkin Donuts K-Cup pods.

However, currency headwinds remain a concern for Smucker. The company also remains concerned with heightened competitive activity in the pet food business.

Meanwhile, investors may also have a look at these well-ranked food stocks such as Omega Protein Corp. (NYSE:OME) and B&G Foods, Inc. (NYSE:BGS) , both sporting a Zacks Rank #1 (Strong Buy).