Will SJM’s Coffee and Snacks Portfolio Drive Success in 2025? – January 3, 2025

The J. M. Smucker Company (SJM Quick QuoteSJM – Free Report) has demonstrated its ability to navigate a dynamic market environment, showcasing resilience in its core categories and strategic execution. With a robust portfolio of brands such as Uncrustables, Meow Mix, Cafe Bustelo and Jif, the company achieved organic net sales and earnings growth in the second quarter of fiscal 2025.

Bạn đang xem: Will SJM’s Coffee and Snacks Portfolio Drive Success in 2025? – January 3, 2025

Factors Driving Growth for The J. M. Smucker Stock

The J. M. Smucker remains committed to its strategic priorities, which include focusing on growing volume and net sales, operating with excellence and prioritizing resources to capitalize on the fastest growth opportunities. Next, the company concentrates on integrating and delivering on the acquired Hostess business (concluded in November 2023). This buyout positions the company to strengthen its presence in the sweet baked goods segment.

Despite near-term headwinds, The J. M. Smucker sees this acquisition as a long-term growth driver, leveraging synergies across retail and away-from-home channels. Moving on, SJM intends to achieve its transformation, cost discipline and cash generation aspirations. The company is committed to increasing its focus and resources to reshape its portfolio to achieve sustainable growth across pet food and pet snacks, coffee, as well as snacking categories.

Talking of reshaping its portfolio, the company divested its Voortman business to Second Nature Brands. The J.M. Smucker sold the Canadian condiments business in January 2024 and Sahale Snacks in November 2023. It also offloaded certain pet food brands in April 2023. These moves help The J. M. Smucker optimize its portfolio and focus on its core growth areas.

The company’s Coffee segment continues to deliver steady growth, with a 3% sales increase in the second quarter, buoyed by pricing actions and brand strength. Despite commodity price volatility, the company has maintained consumer loyalty across its flagship brands. The Cafe Bustelo brand witnessed 20% sales growth, which underscores its rising popularity, supported by national expansion efforts and targeted marketing. Sales of Folgers grew by 5%, reflecting successful price increases and sustained demand for this iconic brand. Through balanced pricing actions and consumer affordability, The J. M. Smucker’s Coffee segment is likely to remain a strong contributor to overall growth.

Xem thêm : Uncovering None And Two Other Hidden Gems For Your Portfolio

Management expects fiscal 2025 net sales to grow 7.5%-8.5%. Key growth drivers include Uncrustables, Milk-Bone, Meow Mix and Cafe Bustelo, all of which are expected to maintain positive momentum throughout the year. The adjusted gross profit margin is projected between 37.5% and 38%, driven by cost efficiencies and a favorable mix.

SJM Price Performance vs. Industry

Image Source: Zacks Investment Research

SJM Has its Set of Challenges

The J.M. Smucker is navigating a challenging consumer landscape characterized by inflationary pressures and reduced discretionary spending, reshaping purchasing habits. These shifting consumer dynamics are particularly problematic for segments like sweet baked goods, where recovery has been slower than expected, prompting management to revise its sales view. The company now expects net sales for the Sweet Baked Snacks unit to reach approximately $1.3 billion in fiscal 2025, a $60 million reduction from prior estimates.

Cost inflation and elevated selling, distribution and administrative (SD&A) expenses further constrain profitability. The J. M. Smucker remains vulnerable to commodity cost inflation and volatility, particularly in its Coffee and Pet Foods segments. While pricing actions have been implemented to mitigate these pressures, rising costs for raw materials, transportation and production pose risks to profitability. The company expects SD&A expenses to increase roughly 9% in fiscal 2025, reflecting higher marketing investments. These pressures are expected to result in a mid-single-digit decline in adjusted EPS for the third quarter.

Final Thoughts on The J.M. Smucker Stock

The J.M. Smucker’s strong brand portfolio, strategic acquisitions and robust performance in coffee and pet food categories highlight its growth potential. On the other hand, cost pressures, inflationary challenges and slower recovery in certain segments underscore the need for cautious optimism. As the company navigates these hurdles, its ability to execute its strategies effectively and maintain focus on high-growth categories will be critical to sustaining growth.

Shares of this Zacks Rank #3 (Hold) company have risen 2.1% in the past six months against the industry’s decline of 2.6%.

Some Solid Bets

Xem thêm : AXIS Capital Inks $2.3B Loss Portfolio Transfer Deal with Enstar Group in Major Insurance Restructuring

We have highlighted three better-ranked stocks, namely United Natural Foods, Inc. (UNFI Quick QuoteUNFI – Free Report) , Ingredion Incorporated (INGR Quick QuoteINGR – Free Report) and Freshpet (FRPT Quick QuoteFRPT – Free Report) .

United Natural currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.

Ingredion Incorporated manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently carries a Zacks Rank #2 (Buy).

INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.

Freshpet, a pet food company, presently carries a Zacks Rank #2. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.