CAG ConAgra Brands Inc

Ohio-based The J. M. Smucker Company (SJM)’s Board has announced an increase in the company’s share buyback authorization and has also declared a dividend on its shares.

Smucker’s board has announced to pay its shareholders a quarterly dividend of 48 cents per share on March 1, 2012, of record at the close of business on February 10, 2012.

In addition, Smucker’s board has increased the share repurchase authorization of the company by five million shares. Currently, Smucker has approximately two million shares remaining for repurchase under its January 2011 authorization.

Smucker’s previous buyback program had benefited the company’s second-quarter 2012 adjusted earnings, as it resulted in a decline of the weighted-average shares outstanding.

The company delivered adjusted earnings, excluding restructuring and merger and integration costs (‘project costs’), of 17 cents and 13 cents per share in the second quarter of 2012 and 2011, respectively.

Further, Smucker had generated cash and cash equivalents of $496.3 million at the end of October 31, 2011, compared with $487.5 million at the end of October 31, 2010. Cash flow provided from operating activities was $118.2 million, compared with $46.8 million in the same period of 2010.

Besides dividends and share repurchases, Smucker has also been using its surplus cash in acquisitions. In late October 2011, Smucker decided to acquire a major portion of the North American foodservice coffee and tea operations of the packaged food company Sara Lee Corporation (SLE) for $350 million. The deal is expected to close in early 2012 and about 450 Sara Lee employees are expected to be transferred to Smucker.

The acquisition is expected to add net sales of approximately $100 million to the company in fiscal 2012. However, it is not expected to have a material impact on earnings per share, excluding one-time costs of the transaction.

In addition, one-time costs are estimated to be approximately $25 million, out of which one-third is expected to be incurred in fiscal 2012, and the remainder in fiscal 2015.

Furthermore, on a full-year basis, the transaction is expected to generate EBITDA of approximately $70 million to $75 million, and earnings of about 10 cents per share, excluding one-time costs. Smucker expects an annual amortization expense of approximately $15 million to $20 million for the full-year 2012.

Smucker is due to announce its third-quarter 2012 earnings results on February 16 and the Zacks Consensus Estimate for the quarter is $1.41 per share. Currently the company competes with ConAgra Foods Inc. (CAG) and Kraft Foods, Inc. (KFT), and has a Zacks #3 Rank, implying a short-term Hold recommendation. Over the long-term, we provide a Neutral recommendation on the stock.

 
CONAGRA FOODS (CAG): Free Stock Analysis Report
 
KRAFT FOODS INC (KFT): Free Stock Analysis Report
 
SMUCKER JM (SJM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research