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Why J.M. Smucker (SJM) Is Tumbling on Friday

Tickers in this article: SJM

NEW YORK (TheStreet) -- Peanut butter and fruit spreads maker J.M. Smucker  was tumbling on Friday after depressed sales caused it to cut full-year guidance.

By midafternoon, shares had taken off 4% to $91.38. Trading volume of 3.5 million was more than three times its three-month daily average.

In the three months to January, the company reported revenue 6% lower than a year ago to $1.47 billion. Analysts surveyed by Thomson Reuters had expected sales of $1.53 billion.

Third-quarter net income of 66 cents a share fell short of consensus by 2 cents.

Net sales were lower primarily due to the impact of a 6% reduction in net price realization, a result of price declines on coffee and peanut butter since the beginning of the year-ago quarter.

By segment, U.S. retail coffee dropped 8% to $578.9 million, U.S. retail consumer foods decreased 4% to $557.8 million, and international sales fell 6% to $328.8 million.

"We continue to navigate through a challenging operating environment. This journey is supported by our leading market position with strong and healthy brands," said CEO Richard Smucker in a statement.

The Orrville, Ohio-based business now sees revenue for the full year ending April declining 5% to total sales of around $5.6 billion. Analysts had expected full-year sales of $5.78 billion.

Per-share earnings guidance was downwardly revised to between $5.55 and $5.60 from $5.72 to $5.82. Analysts had forecast net income of $5.78 a share.

"While we expect our fourth quarter earnings to be down compared to a strong quarter last year, we want to reiterate that our business fundamentals remain sound and our prospects for ongoing earnings growth continue," added Smucker.

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TheStreet Ratings team rates SMUCKER (JM) CO as a Buy with a ratings score of A-. The team has this to say about their recommendation:

"We rate SMUCKER (JM) CO (SJM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, reasonable valuation levels, expanding profit margins, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."