Facebook
Twitter
Consumer products giant The J.M. Smucker Co. (NYSE: SJM) saw its stock price jump 7% on Thursday after the company posted better-than-expected quarterly results before the opening bell.
Smucker has rewarded investors with some tasty gains in recent months. The stock is up 15% just since the start of the year, which is well ahead of the broader market. The S&P 500 is down 4% year-to-date.
J.M. Smucker is a tried-and-true company with a number of popular brands, including Folgers, Smuckers, Pillsbury and Jif. It’s likely one or multiple J.M. Smucker products can be found in nearly every household across America.
It could be that this stability and its reliable profits are why Smucker has outperformed the market this year. Once again, it proved to investors that they don’t have to worry about the current panic rippling through the markets. This company is as rock-solid as they come.
Spreading on Some Profits
Overall, J.M. Smucker reported $1.32 in adjusted earnings per share on $1.95 billion of revenue last quarter. The key driver was its coffee business, which finally posted growth. Smucker has put a lot of effort into rejuvenating its sluggish coffee business, and at long last got some positive results. Sales in the U.S. coffee business rose 12% last quarter, the first time in 11 quarters that the segment showed growth.
Smucker has been trying to right the ship after it increased prices of Folgers coffee last year, which the company later admitted was a mistake. The price increase caused consumers to switch to lower-priced coffee brands. Smucker then cut prices for Folgers and Dunkin’ Donuts coffee by 6% last month, and finally saw growth in its coffee business.
The results easily beat analyst expectations for Smucker earnings. Estimates called for $1.22 in adjusted EPS, along with $1.89 billion of revenue. Such a strong beat on both the top and bottom lines was a strong indication to investors that the company’s strategic plan is working well.
Smucker expects 2015 to be another highly profitable year. Full-year earnings are expected to be $5.65-$5.80 per share, on an estimated $8 billion of revenue.
Price Is Rich, But Perhaps Justified
To be sure, J.M. Smucker stock isn’t cheap. It trades for 35 times trailing EPS – a fairly lofty level. But it’s also true that premium stocks often command premium valuations. Investors appear very comfortable with Smucker’s growth potential. It’s possible the company can continue to grow at high enough rates to justify its current valuation.
Plus, investors are treated to a tasty 2.4% dividend, which should grow over time. Thanks to the company’s steady earnings growth, the dividend has grown 10% per year.
The bottom line is that investors could wait for a better price to buy Smucker, although if the company keeps growing, they may be waiting for a long time.
How Rockefeller really got rich
Upon his death, John D. Rockefeller held a fortune worth $336 billion in today’s dollars. But the conventional account of how he actually made his billions is way off base.
The truth is, much, if not most of Rockefeller’s vast fortune was due to one simple move. And by making this same move, ordinary people across America are getting rich, too. The best part: you can join them today. All it takes is a few minutes.