J.M. Smucker Lowers FY21 Outlook After Crisco Sale

J.M. Smucker has updated its fiscal 2021 outlook after completing the divestment of its Crisco oils and shortening business to B&G Foods Holdings for $550 million.

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J.M. Smucker (SJM) expects fiscal 2021 net sales to remain flat or increase by 1% compared to its earlier growth guidance of 1% to 2%. The packaged food manufacturer projects adjusted earnings in the range of $8.35 to $8.65 per share compared down from its previous adjusted EPS guidance range of $8.55 to $8.85. The company maintained its free cash flow guidance range of $975 million to $1,025 million.

The company said that the updated guidance reflects “the removal of divested net sales for the remainder of fiscal 2021 of approximately $100 million and removal of adjusted earnings per share of $0.20 as compared to previous guidance, excluding any potential benefit from the use of proceeds from the sale.”

J.M. Smucker recently reported 2Q earnings of $2.39, which exceeded the Street’s estimates of $2.23 and grew 6% year-over-year. Revenues rose 4% to $2.03 billion and topped analysts’ expectations of $2.01 billion, driven by higher demand for consumer foods and coffee amid the coronavirus pandemic. (See SJM stock analysis on TipRanks)

On Nov. 25, Jefferies analyst Robert Dickerson maintained a Hold rating and a price target of $127 (8.6% upside potential) on the stock, citing “margin risk into next fiscal year.” The analyst remains encouraged with upbeat 2Q results but lists concerns regarding “near-term brand building needs, higher trade spend, lower fixed cost absorption, and inflating freight and transportation costs, all combined with a potentially more normalized forthcoming promotional environment.”

Meanwhile, the Street has a cautiously bearish outlook on the stock. The Moderate Sell analyst consensus is based on 2 Holds and 1 Sell. The average price target stands at $119.33 and implies upside potential of about 2.1% to current levels. Shares have gained 12.3% year-to-date.