J.M. Smucker Divests Voortman to Sharpen Focus on Core Growth

The J.M. Smucker Co.’s SJM divestiture of the Voortman business to Second Nature Brands is a strategic effort to optimize its portfolio and focus on the company’s core growth areas. The deal, valued at $305 million, was originally announced on Oct. 22, 2024 and includes the Voortman trademarks, the company's leased manufacturing facility in Burlington, Ontario and the transfer of approximately 300 employees to Second Nature Brands. This sale is part of J.M. Smucker's ongoing strategy to optimize its portfolio and focus on core growth brands that align with the company’s long-term business goals.Image Source: Zacks Investment ResearchStrategic Rationale & Financial Implications for SJMThe sale of the Voortman business is part of a series of divestitures by J.M. Smucker to better align its operations with the company’s strategic priorities. Along with previous divestitures of the Canada condiment and Sahale Snacks businesses, this transaction demonstrates the company's ability to take decisive actions to focus on growth and profitability. By streamlining its portfolio, SJM positions itself to invest in areas with stronger growth potential, such as the company’s recent acquisition of Hostess Brands.The divestiture has resulted in updates to J.M. Smucker's fiscal 2025 financial guidance. The company now expects full-year net sales to increase 7.5% to 8.5% year over year compared with the previous guidance of 8.5% to 9.5%, indicating the impact of removing approximately $65 million in net sales from the divested business. This adjustment will be evenly distributed across the remaining fiscal quarters. On a comparable basis, which excludes sales from the Hostess Brands acquisition and prior divestitures such as Voortman, Canada condiment and Sahale Snacks businesses, net sales are expected to grow 1% to 2%.J.M. Smucker has however reaffirmed its fiscal 2025 outlook for adjusted earnings per share (EPS), free cash flow and capital expenditures, as previously communicated in its Nov. 26, 2024, quarterly earnings report. These elements of the financial guidance remain unaffected by the Voortman divestiture. Adjusted EPS is expected to be between $9.70 and $10.10. The company anticipates free cash flow to be around $875 million, supported by operational efficiency and effective working capital management. Planned capital expenditures are anticipated at $450 million, demonstrating ongoing investments in capacity and infrastructure.Factors Driving J.M. SmuckerJ.M. Smucker is focused on portfolio optimization and growth in high-potential categories, with efforts centered on improving the Hostess brand through enhanced execution, expanded distribution and a new marketing campaign. Innovations like $1 value packs and refreshed packaging aim to deepen consumer engagement.Uncrustables is a key growth driver, expected to exceed $1 billion in sales by fiscal 2026, supported by new products and increased production capacity. In the coffee segment, strategic pricing and co-promotions are addressing inflationary pressures, while Meow Mix continues to perform well in the pet portfolio. These initiatives imply a balanced strategy to navigate current challenges and drive long-term growth.Wrapping UpThe abovementioned divestiture indicates J.M. Smucker's commitment to refining its brand portfolio to strengthen the company’s competitive position in key categories. This move demonstrates a clear focus on unlocking value for its shareholders while maintaining operational efficiency. Shares of this Zacks Rank #3 (Hold) company have increased 7.1% in the past six months, comfortably outpacing the industry’s 1.1% decline.Key PicksSome better-ranked stocks are Ingredion Incorporated INGR, BRF Brasil Foods SA BRFS and Freshpet Inc.  FRPT.Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. It currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Ingredion’s current-financial year earnings indicates growth of 12.5% from the 2023 reported figures. INGR has a trailing four-quarter average earnings surprise of 9.5%.BRF Brasil Foods SA is a Brazil-based food company focused on the production and sale of poultry, pork, beef cuts, milk, dairy products and processed food products. It carries a Zacks Rank of 2 (Buy) at present. The Zacks Consensus Estimate for Brasil Foods’ current-financial year earnings and sales indicates growth of 260% and 14.7%, respectively, from 2023 reported levels. BRFS has a trailing four-quarter average earnings surprise of 51.5%.Freshpet is a pet food company. The company manufactures and markets natural fresh foods, refrigerated meals and treats for dogs and cats in the United States and Canada. It currently has a Zacks Rank of 2.The Zacks Consensus Estimate for Freshpet’s current-financial year earnings and sales indicates growth of 224.3% and 27.3%, respectively, from 2023 reported levels. FRPT has a trailing four-quarter average earnings surprise of 144.5%.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. 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