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JM Smucker Co SJM

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Despite Smucker's Better-Than-Expected Fiscal 2021 Results and 2022 Guidance, Valuation Looks Rich

Analyst Note

| Rebecca Scheuneman, CFA |

No-moat Smucker’s April-ending fiscal 2021 results generally topped our expectations, with organic sales growth of 4.6%, a 19.1% adjusted operating margin, and EPS of $9.12, compared with our forecast of 0.3%, 19.3%, and $8.56, respectively. Guidance for fiscal 2022 also exceeded our estimates, including organic sales growth of 2% and adjusted EPS of $8.70-$9.10, versus our forecast of 1% and $8.35. Smucker should experience lasting benefits from the pandemic, given the 3 million Keurig coffee machines purchased and the high-single-digit increase in pets adopted during the crisis. We think remote working arrangements will be more flexible moving forward, which should boost Smucker’s annual coffee sales by $135 million (2% of consolidated sales, including a $147 million boost at retail partially offset by a $12 million decline in away from home). We think the increased pet population will lift Smucker’s annual pet food sales by $200 million, or 3% of total sales.

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Company Profile

Business Description

J.M. Smucker is a packaged food company that primarily operates in the U.S. retail channel (87% of fiscal 2020 revenue), but also in U.S. food-service (10%), and international (3%). Its largest category is pet food and treats (38% of 2020 revenue), with popular brands such as Milk-Bone, Meow Mix, 9Lives, Kibbles 'n Bits, Nature's Recipe, and Rachael Ray Nutrish. Its second- largest category is coffee (32%) with the number-two brand Folgers and number-six Dunkin'. Other large categories are peanut butter (9%), with number-one Jif, fruit spreads (5%) with number-one Smucker's, and frozen hand-held foods (5%) with number-one Uncrustables.

One Strawberry Lane
Orrville, OH, 44667-0280
T +1 330 682-3000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jan 31, 2021
Fiscal Year End Apr 30, 2021
Stock Type Slow Growth
Employees 7,300


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