SJM Q2 Earnings Miss Despite Higher Sales, FY26 Guidance Tightened

Core Insights - The J. M. Smucker Company (SJM) reported second-quarter fiscal 2026 results with a year-over-year decline in earnings, missing the Zacks Consensus Estimate, while net sales increased and exceeded expectations due to strong demand for its flagship brands [1][10] Financial Performance - Adjusted earnings were $2.10 per share, falling short of the Zacks Consensus Estimate of $2.12 and down 24% from $2.76 in the prior-year quarter [2] - Net sales reached $2,330.1 million, a 3% year-over-year increase, surpassing the Zacks Consensus Estimate of $2,322 million; excluding noncomparable sales from last year, net sales grew 5% [3] - Adjusted gross profit decreased by 10% due to high commodity costs, tariffs, and adverse volume/mix, partially offset by improved net price realization [4] - Adjusted operating income fell 20% year-over-year to $394.3 million, driven by lower gross profit and increased selling, distribution, and administrative (SD&A) expenses [4] Segment Performance - U.S. Retail Coffee segment sales increased by 21% to $848.9 million, with net price realization up 27%, while volume/mix declined by 6%; segment profit decreased by 24% to $154.3 million [5] - U.S. Retail Frozen Handheld and Spreads segment sales decreased by 5% to $461.1 million, with volume/mix negatively impacting sales by 8 percentage points; segment profit fell 12% to $102.1 million [6] - U.S. Retail Pet Foods segment sales dropped by 7% to $413.2 million, with volume/mix having an 8-percentage-point adverse impact; segment profit grew by 2% to $124.4 million [7] - Sweet Baked Snacks segment sales were $256.1 million, down 19% year-over-year, with segment profit plummeting 69% to $21.8 million [8] - International and Away From Home segment net sales increased by 9% to $350.8 million, exceeding the Zacks Consensus Estimate of $345 million [9] Guidance and Outlook - For fiscal 2026, SJM anticipates net sales growth of 3.5-4.5%, revised from the previous 3-5% estimate, including a $134.7 million impact from divestitures [14] - Comparable net sales are expected to increase by approximately 5-6%, down from the earlier 4.5-6.5% range, reflecting higher net price realization but offset by volume/mix declines [15] - Adjusted EPS for fiscal 2026 is now projected to be in the range of $8.75-$9.25, compared to the previous estimate of $8.50-$9.50 [16]