J.M. Smucker’s Free Cash Flow Outlook Solid

Image: J.M. Smucker’s shares have faced pressure during the past several months, but its free cash flow outlook looks solid.

By Brian Nelson, CFA

On June 6, J.M. Smucker (SJM) reported mixed fiscal fourth quarter results with revenue coming up a bit short relative to expectations and the bottom line coming in higher than consensus. Adjusted net sales, excluding acquisitions, divestitures, and foreign currency fluctuations advanced 3% thanks to better net price realization in its U.S. Frozen Handheld and Spreads, U.S. Retail Pet Foods, and for International and Away from Home.

The company’s volume/mix increased 1% thanks to Smucker’s Uncrustables frozen sandwiches, Folgers coffee, Jif peanut butter, among other areas. Adjusted gross profit increased 15% in the quarter. Adjusted operating income advanced 13%, while adjusted earnings per share nudged higher 1% in the quarter. Management’s commentary was upbeat in the press release:

Our fourth quarter and full-year results underscore the strength of our business and the demand for our leading brands. Our focus on superior execution and disciplined cost management helped drive our strong results in a dynamic operating environment. Our transformed portfolio, including the acquisition of Hostess Brands during the fiscal year, has strengthened our business for long-term profitable growth across our key platforms of coffee, Uncrustables frozen sandwiches, dog snacks and cat food, and sweet baked snacks.

Looking ahead, fiscal year 2025 will be a year of investment in our brands, capabilities, and talented employees, who have been instrumental to our success. Our strategy is working and our priorities are clear: deliver our core business, successfully integrate the Hostess business, achieve our synergy aspirations, and advance our transformation and cost discipline activities. We are confident we are well-positioned to deliver long-term growth and increase shareholder value. 

The company released its full-year outlook for fiscal 2025. Net sales are expected to increase 9.5%-10.5% thanks largely to its acquisition of Hostess Brands, while adjusted earnings per share are targeted in the range of $9.80-$10.20. Adjusted earnings per share were $9.94 during fiscal 2024. Comparable net sales are expected to grow between 1.5% and 2.5%. Free cash flow is expected to be $900 million on the year, with the firm planning to spend $450 million in capex during the fiscal year. We liked J.M. Smucker’s fiscal fourth quarter results and are huge fans of its free cash flow generation, but we like companies in the newsletter portfolios more. Nonetheless, J.M. Smucker is one for your radar. Shares yield ~3.7% at the time of this writing.

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