A Smackdown for Smucker

It's really not fair to expect a company like J.M. Smucker (NYSE: SJM  ) to get dramatically better or more interesting in one quarter's time. Even still, it looks to this Fool like the situation may be getting slightly worse instead.

Reported sales for the fourth quarter were down 3%, or down 1% if you exclude the divested industrial business. While the special markets segment showed a little growth (up 2% without the industrial business) on good results in beverages and food service, the U.S. retail business was down 1% on a very weak result for oils and baking products.

Adding injury to insult, margins slid at both the gross and operating levels, and income from continuing operations fell 12%. Even after adding expenses related to restructuring, acquisitions, and so forth, you still end up with a roughly 3% drop in earnings per share.

Though company management chattered about its success in the fall baking season, I think a couple of facts outweigh this optimistic assessment. First, a rough approximation of return on invested capital for the first nine months of the year comes up around 6.9% -- pretty darn pathetic, and possibly below the cost of capital. Second, guidance is going down yet again. Not by a lot, I'll grant, but still down.

There are plenty of things about this company that set me on edge. Not only do we have talk about long-term growth strategies amidst weak results, but also the company doesn't bother including a cash flow statement with its earnings release. I also haven't forgotten management's recent statement that acquisitions would be the top priority for cash -- a decision I question, unless or until current management can maximize the business they already have.

No, my Fools, there are just too many better ideas out there to give Smucker much consideration. ConAgra (NYSE: CAG  ) might be on the road to recovery, Motley Fool Income Investor pick Unilever (NYSE: UL  ) certainly is, and companies such as Kellogg (NYSE: K  ) and General Mills (NYSE: GIS  ) also seem to be on much stronger footing. At today's prices, I think any of those four might be more worthy ideas than Smucker.

Feed on further Foolishness:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).


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