Can the J.M. Smucker Company Sweeten Your Portfolio?
The J. M. Smucker Company (NYSE:SJM) sparked my interest after I saw that it has delivered a record earnings per share much to the appreciation of shareholders. It is a massive food company that owns more brands than you may think. The company operates through three segments: U.S. Retail Coffee; U.S. Retail Consumer Foods; and International, Foodservice, and Natural Foods.
It offers fruits, coffee, peanut butter, fruit spreads, shortening and oils, baking mixes and ready-to-spread frostings, canned milk, flour and baking ingredients, juices and beverages, frozen sandwiches, ready-to-eat waffles, toppings, syrups, jelly products, pickles and condiments, and fruit industrial products. The company provides its products under Folgers, Dunkin Donuts, Millstone, Café Bustelo, Café Pilon, Smucker’s, Jif, Hungry Jack, Uncrustables, Dickinson’s, Adams, Laura Scudder’s, Goober, Magic Shell, Crisco, Pillsbury, Eagle Brand, Borden and Elsie design, Martha White, White Lily, Funfetti, Plate Scapers, Bick’s, Five Roses, Robin Hood, Carnation, R. W. Knudsen Family, Santa Cruz Organic, Double Fruit, Recharge, Red River, Crosse & Blackwell, and Golden Temple brand names.
So how does it make its money? Well, it sells its products through direct sales and brokers to food retailers, food wholesalers, drug stores, club stores, mass merchandisers, discount and dollar stores, and military commissaries. It also targets retail channels, and health and natural foods stores and distributors, as well as through foodservice distributors and operators, such as restaurants, lodging, schools and universities, and health care operators. The company is really delivering and an analysis of its recent performance gives us an indication of where the company is heading.
At first glance it looked like the company had performed poorly. Fourth quarter net sales decreased 8 percent in 2014, compared to 2013, driven by pricing actions in the quarter. As expected, pricing actions in U.S. Retail Coffee in the quarter reflect decisions made to pass through lower costs realized earlier in the year. The impact of the exit of certain portions of the company’s business in its International, Foodservice, and Natural Foods segment and unfavorable sales mix also contributed to the net sales decrease. A combined $22.4 million from the acquired Enray business and the Cumberland distribution agreement contributed to net sales in the fourth quarter of 2014.
Sales mix and foreign exchange were both unfavorable to net sales in the fourth quarter of 2014, compared to the fourth quarter of 2013, and reduced net sales by 2 percent and 1 percent, respectively. Volume gains were realized in Crisco oils, the company’s flour brands, and Folgers coffee, and were partially offset by the impact of the previously announced business exits in the International, Foodservice, and Natural Foods segment and declines in Pillsbury baking mixes and frosting.