J. M. Smucker (NYSE: SJM) reported Q3 EPS of $2.35, $0.12 better than the analyst estimate of $2.23. Revenue for the quarter came in at $1.97 billion versus the consensus estimate of $1.97 billion.

EXECUTIVE SUMMARY

• Net sales decreased $39.6 million, or 2 percent, primarily reflecting anticipated declines within the U.S. Retail Pet Foods segment.
• Net income per diluted share was $1.64. Adjusted earnings per share was $2.35, an increase of 4 percent.
• Cash from operations was $521.6 million, an increase of 24 percent. Free cash flow was $465.1 million in the quarter, compared to $333.0 million in the prior year.
• The Company reaffirmed its full-year fiscal 2020 net sales, adjusted earnings per share, and free cash flow outlook.

CHIEF EXECUTIVE OFFICER REMARKS

"Third quarter results were in-line with our expectations, benefiting from continued investment in our strategic growth imperatives and the decisive actions we are taking to improve certain areas of the business. Net sales performance reflected strong growth for the Smucker's® Uncrustables® brand and improved volume fundamentals for our coffee and peanut butter brands, which supported market share and household penetration growth in both categories. This helped partially offset the anticipated decline for our dog food business," said Mark Smucker, President and Chief Executive Officer.

"Our results in the quarter reinforced our commitment to operate with financial discipline, highlighted by adjusted earnings per share growth of 4 percent, strong free cash flow of $465 million, and net debt repayments exceeding $300 million. As we look forward, we are confident in delivering on our full-year guidance, while positioning the business for consistent long-term growth and shareholder value creation."

GUIDANCE:

J. M. Smucker sees FY2020 EPS of $8.10-$8.30, versus the consensus of $8.25.

• Net sales are expected to be down 3 percent compared to the prior year, which includes the loss of $105.9 million of sales in the first 4 months of fiscal 2019 related to the divested U.S. baking business and $25.4 million of incremental noncomparable sales for Ainsworth Pet Nutrition, LLC ("Ainsworth"). On a comparable basis, net sales are expected to be down 2 percent.
• Adjusted earnings per share is expected to range from $8.10 to $8.30, based on 114.0 million shares outstanding. Earnings guidance reflects the contribution from sales at a gross profit margin of approximately 38.2 percent, SD&A expenses declining approximately 2.5 percent compared to the prior year, and an effective tax rate of 24.0 percent. Free cash flow is expected to be approximately $850 million.

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