Smucker results lifted by robust coffee sales, pet food push

(Reuters) - Packaged food maker J.M. Smucker Co beat analysts’ estimates for quarterly sales and profit on Tuesday, driven by higher demand for its Dunkin’ Donuts-branded coffees and its purchase of premium pet foods maker Ainsworth.

Shares of the largest U.S. coffee roaster, which also reaffirmed its full-year forecast for the second time in a week, rose about 7.6 percent to $108.75 in morning trade.

Smucker’s results come in contrast to those of food makers such as Kraft Heinz Co, Mondelez International Inc and Hershey Co which reported sales short of analysts’ estimate in their latest quarter.

Smucker has been doubling down on pet food and coffee, while offloading non-core businesses like its U.S baking unit, including brands such as Pillsbury.

To expand the pet foods portfolio, the company acquired Milk Bone-owner Big Heart Pet Brands for $5.8 billion in 2015. It also bought Ainsworth Pet Nutrition for $1.9 billion last year, adding premium brands such as Nutrish and Rachael Ray to its basket.

As a result, Smucker’s U.S. retail pet foods business, the company’s biggest, saw a 35 percent rise in sales in the third quarter.

The company’s U.S retail coffee business sales increased 2 percent, supported by higher demand for its Dunkin’ Donuts-branded coffee and its premium coffee line, 1850, launched in April last year.

Total net sales rose 5.7 percent to $2.01 billion, topping the average analyst estimate of $1.99 billion - the first beat in the last four quarters, according to IBES data from Refinitiv.

“We see the stock trading up strongly around this performance, which further validates the full-year view and ... distances Smucker from the recent Kraft Heinz controversy,” Stifel analyst Christopher Growe said in a client note.

Packaged food companies have come under scrutiny after Kraft Heinz disclosed a $15 billion writedown on its marquee brands while reporting a quarterly loss last week, highlighting the tough environment for the industry.

Smucker’s net income fell to $121.4 million, or $1.07 per share, in the quarter ended Jan. 31, from $831.3 million, or $7.32 per share, a year earlier, as it recorded a impairment charge related to its pet foods segment.

Excluding items, the company earned $2.26 per share, beating analysts estimate of $2.01 per share.

Last week, the Folgers coffee maker projected full-year adjusted profit for fiscal 2020 above Street estimates, betting on its upcoming product launches and price hike in the pet foods segment it implemented this month.

Reporting by Soundarya J in Bengaluru; Editing by Maju Samuel