Tags: J.M. | Smucker | growth | SJM

J.M. Smucker Growth Continues On Acquisitions

Monday, 16 Jan 2012 11:59 AM

By Tim Plaehn

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J.M. Smucker (SJM) is a century-old consumer products company with a 10-year history of recent growth. That growth story has been obtained through a combination of organic sales, product innovations and strategic acquisitions.

J.M. Smucker divides it business into the sectors of U.S. Retail Coffee, U.S. Retail Consumer Foods, International Foodservice, and Natural Foods. Some of the company's brands include Folgers coffee, Smucker's, Jif peanut butter and Eagle Brand condensed milk.

Smucker purchased the Folgers brand from Proctor & Gamble (PG) in 2008 and now accounts for 35 percent of the U.S. retail coffee market. For Smucker, coffee accounts for 42 percent of sales and 50 percent of profits. U.S. consumer foods account for 39 percent of sales and 36 percent of profits.

J.M. Smucker closed the first half of its 2012 fiscal year on Oct. 31, 2011. For the first six months of the year the company reported revenue of $2.7 billion, up 18 percent from $2.33 billion for the first half of fiscal 2011.

Net income for the period was $2.09 per share, down from $2.11. Net operating profit declined to 14.5 percent of sales in the half year from 17.4 percent, primarily on higher raw material costs.

Growth streak

J.M. Smucker has produced year-over-year higher profits every year since 2002. For the full fiscal 2012, the consensus earnings estimate is $5.02 per share, compared to earnings of $4.81 in 2011.

Smucker's management expects increased product pricing in 2012 to recover some of the lost profit margin caused by higher input prices. In January 2012, the company closed its purchase of a foodservice coffee and hot beverage business from Sara Lee (SLE).

J.M. Smucker has a history of dividend increases, boosting the payout every year since at least 1997. For 2011, the quarterly dividend was increased to 48 cents from the previous 44 cents. The stock yields about 2.5 percent.

A recent report from the analysts at Stifel Nicolaus reiterated their hold rating on SJM but increased the target price by $10 per share to about 15 percent above the current share value.

The company next reports on Feb. 16.

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