November 21, 2008 / 8:16 PM / 10 years ago

UPDATE 3-Smucker Q2 beats Street, confirms '09 view; shares up

* Q2 EPS, rev beat estimates

* Confirms FY09 outlook

* Cutting prices on flour, Crisco oil and shortening

* Shares up as much as 10 pct (Adds conference call details, analyst comments, updates stock movement)

By Anne Pallivathuckal

BANGALORE, Nov 21 (Reuters) - Peanut-butter and jelly maker J.M. Smucker Co (SJM.N) posted better-than-expected quarterly results as increased prices drove revenue growth across all major brands and businesses, and backed its 2009 outlook, sending its shares up as much as 10 percent.

However, the company said it is significantly cutting prices on food items such as flour and Crisco oil and shortening from January, due to a drop in commodity costs.

“Certain commodity costs have declined and we probably expect to realize the benefit of these lower commodity costs over the next several quarters,” Chief Financial Officer Mark Belgya said on a conference call with analysts.

Belgya said the company expects to address pricing in certain categories to reflect the decline in costs.

S&P Equity analyst Tom Graves, who has a “strong buy” rating on Smucker, said he did not expect the price cuts to have a major negative impact on margins if the company is able to lower manufacturing costs.

“With Smucker, my feeling is that even if they’re giving up some pricing, they should get some offsetting benefit going forward from the lower commodity costs,” Graves said.

Graves cut his price target on the stock to $53 from $58, due to volatile commodities and currencies, and a likely less-favorable pricing environment.


The company reported second-quarter earnings, excluding restructuring, merger and integration costs, of $1.02 a share, above analysts’ average estimate of $1.01 a share.

For the quarter ended Oct. 31, net sales rose 19 percent to $843.1 million. Analysts expected revenue of $802.1 million.

“The number of meals prepared and consumed at home, as recent market data indicate, continues to be trending upward in this challenging economic environment,” co-CEO Tim Smucker said in a statement.

Smucker said it expects a profit of $3.45 to $3.50 a share for fiscal 2009, before one-time costs associated with the acquisition of the Folgers coffee business from Procter & Gamble Co (PG.N). The company sees net sales of $3.8 billion to $4.0 billion for the period.

Analysts are expecting a profit of $3.43 a share, before items, on revenue of $3.87 billion, according to Reuters Estimates.

Shares of the Orrville, Ohio-based company rose to a high of $41.89 before paring some gains to trade up $3.31 at $41.56 Friday afternoon on the New York Stock Exchange.

For the news alerts, please double-click [ID:nWNAB6238] . For the press release, double-click [ID:nPnCLF003a] . (Editing by Amitha Rajan, Anil D’Silva)

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