J.M. Smucker's Adjusted EPS Jumped 71%. Take Out the Tariff Refund and Here's What the Quarter Actually Looked Like.

One of the more delicious developments on the stock exchange on Wednesday was the latest quarterly earnings report from J.M. Smucker (NYSE:SJM). The storied food company delivered a convincing beat-and-raise quarter, but this was tempered somewhat by a large one-off payment from the U.S. federal government.

Still, there's much that was impressive about Smucker's opening frame of its new fiscal year. Let's sit at the table, grab some utensils, and tuck into this one.

Image source: Getty Images.

Outperformance, even when accounting for the tariff payout

Smucker's first quarter of fiscal 2027 was topped by a net sales figure of $2.2 billion, representing a 5% improvement over the same period of 2026.

Breaking that down by reporting segment, Smucker's No. 1 in terms of revenue also posted the hottest growth. This is U.S. retail coffee, with net sales of almost $808 million; aided by both higher volumes and increased prices -- particularly for the Cafe Bustelo and Dunkin brands -- that figure was 13% higher year over year.

The U.S. retail frozen handheld and spreads business, which houses the jams and other condiments Smucker is most readily identified with, was the No. 2 revenue generator. Higher pricing also benefited this business, as its net sales climbed 3% higher to slightly over $499 million. Also rising 3% was the company's "away from home" (i.e., sales to institutions and non-retail outlets); net sales came in at almost $204 million in the first quarter of 2027. Trailing behind and wagging its tail was U.S. retail pet foods, inching 1% higher to almost $372 million.

The one laggard was sweet baked snacks. Net sales for these offerings slumped due to softness in the snack cakes and breakfast sub-categories. Higher pricing for snack cakes and donuts couldn't save the day; overall net sales declined by 7% to under $237 million.

Top-line items such as unallocated corporate revenue and intersegment eliminations comprised the remainder of Smucker's overall net sales for the period.

Big spending

Moving all the way down the profit and loss statement, Smucker's bottom-line leap was more impressive than any of those sales gains. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) rocketed 70% higher to almost $347 million.

That shakes out to $3.24 per share, but we have to attach a note to that number. $0.84 of it is due to the refunds Smucker received from the U.S. government for tariffs it paid last year. These were imposed by the Trump administration but were quashed by the Supreme Court in February, putting the feds on the hook to return the considerable funds that many American companies spent. In Smucker's case, it had to pay increased duties for imports of raw materials such as coffee beans.

Guiding for more

So the aforementioned convincing beats weren't as powerful as they first appeared. The consensus analyst estimate for adjusted profitability was $2.21 per share, and that for net sales was a shade over $2.1 billion. Still, if we strip that $0.84 tariff payback out of the equation, the $2.40 we're left with is still notably above the collective pundit projection. So kudos to Smucker for its better-than-expected performance.

A tip of the hat is also due the company for raising its full-year net sales guidance, indicating that the quarter wasn't just a one-time, tariff-return-enhanced blowout. Management continues to expect a decrease in the metric for fiscal 2027 compared to the previous year, but a more modest one. The new forecast is for a dip of 1% to 2%; the preceding estimate was a decrease of 3% to 4%.

Meanwhile, adjusted net income should land at $10.50 to $11 per share; formerly, Smucker was estimating $9.75 to $10.25 per share. The updated range, however, includes a roughly $0.60-per-share benefit from the tariff refund (the company aims to reinvest some of it in marketing and distribution).

While the company showed impressive growth this past quarter, at least some of its potential is dependent on price increases -- and this is a sensitive time for such moves, given consumer anxiety about rising costs. I also don't see continued and notable upside in volumes for any of Smucker’s businesses, even the well-performing coffee division.

To me, this stock is a steady, safe income play, as it’s a dependable cash generator that consistently raises its shareholder payout. These days, it has a streak of dividend raises spanning 25 years. In fact, Smucker's quarterly disbursement qualifies as a high-yield dividend, as the yield is currently 3.4%.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends J.M. Smucker. The Motley Fool has a disclosure policy.