3 Reasons Why J.M. Smucker’s Stock Rose 18% in June
J.M. Smucker (NYSE:SJM) stock rose 18% in June, with a near 10% gain between June 8 and June 10 before rising even further at the end of the month. The stock has gained 23% on the year, greatly outpacing the general market.
The company’s stock skyrocketed for three reasons:
1. Quarterly Earnings Report
The company’s quarterly earnings report showed that Smucker sales rose 25% year over year, with profits surging as a result. The company’s jump in revenue and sales is due to the acquisition of Big Heart, a pet food company.
2. Core Sales Rose 5%
The company’s core sales rose by 5%, less impressive than when Big Heart is included in the mix.
3. Profit Margins Are Rising
Smucker’s’ increased sales is just a small factor in the company’s stock rising in the last month. The main driving factor behind the stock’s rally is the increased profit margins that Smucker’s has been able to achieve.
The company’s coffee business, which includes Dunkin Donuts branded products and Folgers K-Cups, has enjoyed increased demand and now totals nearly 33% of the company’s total revenues.
Coffee bean prices are on the decline, adding to more profitability for the company.
Gross profit margins due to falling coffee bean prices has allowed profit margins in the division to rise seven points, up to 30% of sales. The company’s net income has doubled as a result of increased profit margins in the trailing 12-month period, up to $690 million.
Mark Smucker, CEO of the company, plans to further reduce costs by $100 million as the company’s newly acquired pet division integrates further into the company’s operations. Record sales, profits and cash flow in fiscal 2015 has led the brand to remain confident in a strong fiscal 2016 in terms of profit growth.
Sales growth isn’t expected to rise much, and revenue is expected to dip in the next four quarters, but reduced costs will lead to a higher net profit margin for the company, according to executives.
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