Thursday, June 18, 2009

J.M. Smucker closes out the year on a high note

AlphaNinja -

J.M. Smucker(SJM) beat fiscal q4 2009 earnings estimates by about 39cents ---->>>> they made 1.02 in the quarter versus the 63cent expected by the street.

Thanks to the acquisition of Folgers, SJM's gross margin for the quarter increased almost 7%:

Overall, gross profit increased $217.0 million in the fourth quarter of 2009 compared to 2008 with Folgers contributing over 90 percent of the increase. This resulted in an overall improvement in gross margin from 30.9 percent in the fourth quarter of 2008 to 37.4 percent in 2009. The addition of the Folgers business raises the Company's gross margin level. In addition, Folgers' gross margin was favorably impacted by its strong sales, favorable green coffee market conditions, and favorable product sales mix. Gross profit on the Company's base business improved by approximately 7 percent, or 0.9 percentage points.

Selling, distribution, and administrative ("SD&A") expenses increased 53 percent for the fourth quarter of 2009 compared to 2008 with the addition of Folgers accounting for most of the increase. Most SD&A expenses increased at a lesser rate than net sales, resulting in an overall decrease in SD&A from 20.1 percent of net sales to 17.0 percent.

The company is guiding earnings estimates up for 2010, although not aggressively. As they continue to integrate this Folgers business, there could be serious upside to estimates. SJM would be trading at a 10 PE (price-to-earnings) if they earn 4.00 in the next year or two - an extremely attractive multiple for such a world-class company, not to mention world-class management. FCFY(Free-cash-flow yield as a % of market value), will be 10% if they get to $500million in free cash flow, a fantastic yield for this company.


No comments:

Post a Comment