Smucker's Q3 Not As Bad As It Appears, Susquehanna Says

J M Smucker Co (NYSE: SJM) shares dipped lower Wednesday after the food company reported third-quarter results.

What Happened

Smucker said it earned $2.17 per share in the Q3 on revenue of $2.022 billion versus expectations of $2.33 per share and $2.05 billion, respectively. In addition to a top- and bottom-line misses, the company lowered its full year 2019 EPS guidance from $8.40-$8.65 to $8-$8.20. The sales outlook was lowered from $8 billion to $7.9 billion.

Why It's Important

Smucker's Q3 report isn't as bad as the headline numbers suggest, Susquehanna Financial Group's Pablo Zuanic said in a Wednesday research report. The majority of the miss in the quarter is explained by a higher tax rate related to the sale of the baking business in the quarter, he said.

Similarly, one-third of management's revised outlook is tax-related, as the company revised its expected effective tax rate from 24.5 percent to a range of 25.5-26 percent.

Smucker's continued focus on brands that boast better growth and premium products is sufficient reason for investors to be buyers of the stock, the analyst said. 

Susquehanna maintains a Positive rating on Smucker with an unchanged $133 price target.

What's Next

CEO Mark Smucker said in the earnings release that the company will continue focusing on growing "brands consumers love" across all segments, including coffee, pet food and snacks.

"Ongoing execution of our strategy for both growth and core brands is essential to delivering long-term shareholder value," the executive said. 

Smucker shares were down more than 6 percent at $102.53 at the time of publication Wednesday. 

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