What happened

Shares of jelly maker J.M. Smucker (NYSE:SJM) fell nearly 10% in early trading Thursday before clawing back some of their losses as the day wore on. As of 11:45 a.m. EDT, the stock was down 5.3%.

Smucker reported fiscal fourth-quarter 2018 results this morning and missed analyst estimates badly. Wall Street had expected Smucker to report profits of $2.18 per share for Q4 2018. Instead, management reported GAAP earnings of $1.64 per share, and $1.93 per share adjusted for one-time items. By either measure, the results fell short. Quarterly sales of $1.78 billion likewise missed expectations.

Falling stock chart over columns of numbers

Image source: Getty Images.

So what

Sales for the quarter declined a small fraction of a percent year over year, but operating profit jumped 57% and diluted earnings per share grew an even stronger 71%, helped by "higher pricing and lower costs" -- and especially helped by the absence of a big charge to earnings that weighed on last year's Q4 results. Free cash flow, on the other hand, slipped 2.5% to $203 million.

For the full fiscal year, sales declined by half a percentage point to $7.4 billion, diluted earnings per share more than doubled to $11.78, and free cash flow was up 3% at $896 million.

Now what

CEO Mark Smucker blamed "industrywide headwinds and certain discrete items" for the weakness in "adjusted earnings per share," but said that "the actions we are taking to align our portfolio for growth set up our business to win."

Still, management's guidance for the immediate future was disheartening. Although fiscal 2019 sales are predicted to grow 13% to $8.3 billion, adjusted earnings per share will likely fall into a range of $8.40 to $8.65, much less than the big GAAP profit booked in fiscal 2018. Free cash flow, at an expected $800 million to $850 million, could decline by more than 10%.

That being said, even at the low end of guidance, Smucker stock appears to be selling now for only about 14.3 times this year's projected free cash flow. If Smucker can only get its free cash flow to start growing as fast as its projected sales (and maybe start chipping away at the debt load, too?), the stock could yet turn around.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.