The J.M. Smucker Company (SJM), ConAgra Foods, Inc. (CAG), Boulder Brands Inc (BDBD): Who’s The Best Of This Old-School Bunch?

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Earnings Analysis: J.M. Smucker Co. (NYSE:SJM)There are a few things that are American classics: baseball, apple pie, and peanut butter and jelly. The latter has been a staple item in kids’ lunchboxes for decades. Despite rising concerns over allergic conditions, peanut butter continues to be a popular, cheap source of protein for a wide swath of Americans. Since most people don’t want to own a peanut farm, the best way to invest in peanut spreads is through a consumer goods marketer. So, which companies are poised for gains?

The J.M. Smucker Company (NYSE:SJM)

The J.M. Smucker Company (NYSE:SJM) has been delivering solid results for investors lately, as it has built solid product franchises outside of its core jelly spread business. Its acquisition of the JIF brand from The Procter & Gamble Company (NYSE:PG) in 2001 vaulted the company into a national leadership position in the peanut butter category. The J.M. Smucker Company (NYSE:SJM) has also been diversifying into the wholesale coffee business, including its purchase of Sara Lee’s foodservice unit in 2012.

In the first nine months of FY2013, The J.M. Smucker Company (NYSE:SJM) has continued its business momentum, with increases in revenues and adjusted operating income of 9.3% and 9.7%, respectively, versus the prior-year period. The company’s sales growth benefited volume gains in both its JIF and Smucker spread businesses, as well as acquisition-fueled gains in its foodservice segment. In addition, Smucker has maintained its profit margin by passing commodity cost inflation to its customers through price increases.

Looking ahead, The J.M. Smucker Company (NYSE:SJM)’s strong product portfolio has given it the leverage to maintain and increase its shelf space at the nation’s grocers. It’s strong operating cash flow and limited use of debt also provides the funds for waging the marketing war for supremacy in the peanut butter category. In hindsight, The J.M. Smucker Company (NYSE:SJM)’s acquisition of the JIF brand was a shrewd, value-enhancing move.

ConAgra Foods, Inc. (NYSE:CAG)

Similar to Smucker, ConAgra Foods, Inc. (NYSE:CAG) has been transforming itself into a packaged food juggernaut and delivering solid gains to investors. The company has been a serial acquirer over the past decade that has added leading product brands, including Swiss Miss chocolate mixes, Orville Redenbacher’s popcorn, and Peter Pan peanut spreads. However, ConAgra Foods has used a healthy mix of debt, with a current funded debt load of roughly $11 billion, which adds some risk to its investment profile.

In the first nine months of FY2013, ConAgra Foods, Inc. (NYSE:CAG) has generated solid financial results, with increases in revenues and adjusted operating income of 9.7% and 8.0%, respectively, compared to the prior-year period. While organic sales volumes showed limited growth company-wide, ConAgra had some pockets of strength, including rising volumes in its peanut spread category. Like Smucker, ConAgra Foods, Inc. (NYSE:CAG) was also able to maintain its strong profit margin by selectively passing along rising commodity costs to customers.

Looking ahead, ConAgra Foods, Inc. (NYSE:CAG) continues to diversify away from its flour milling roots, with a recent decision to contribute its milling operations to a joint venture that will align the company with competitor Cargill. The move should allow management to further focus on its growing dominance in the private label food business, which was the rationale behind its recent acquisition of packaged food giant Ralcorp. ConAgra also needs to start paying down its debt, so that is will have greater flexibility for future strategic moves.

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