Shares of jelly maker J.M. Smucker (NYSE:SJM) popped more than 8% in early trading Friday after the company topped analyst estimates for fiscal Q2 2020 earnings this morning, but then gave back roughly half their gains. The stock was up only 4.2% as of 11:40 a.m. EST today.
Analysts had forecast that Smucker would earn $2.13 per share, pro forma, on sales of $1.97 billion in fiscal Q2. Smucker just missed that target, with $1.96 billion in sales. But its adjusted earnings came in ahead of consensus at $2.26 per share.
What sent Smucker stock up, and why did it subsequently start slumping? The first answer is: profits.
Not only did Smucker's adjusted profits increase in Q2, profits as calculated according to generally accepted accounting principles (GAAP) grew 11% year over year, to $1.85 per share. And Smucker's free cash flow for the quarter was up an impressive 28% at $160.6 million.
Year over year, sales declined 3%, and CEO Mark Smucker acknowledged this, admitting that "our second-quarter sales performance did not meet our expectations." But even so, he said, "we delivered EPS growth ahead of our projection."
Sadly, the same may not be true over the remainder of this year.
Updating guidance for the balance of fiscal 2020, Smucker is now forecasting a 3% slide in sales year over year, down from previous projections in a range of breakeven to a 1% decline, in line with Q2 performance. Expectations for pro forma profits ($8.20 per share) and free cash flow ($850 million) also slipped since Smucker last gave guidance, and appear to be below the analyst consensus.
Result: Smucker stock is still up on the day -- just not as much as it might have been if it had stopped talking after reporting earnings, and not mentioned the guidance.