John B. Sanfilippo & Son, Inc. (JBSS) — a holding in our model portfolio — processes and distributes nuts; the stock reacted favorably to its fiscal 2021 Q2 report on January 27, notes Taesik Yoon, editor of Forbes Investor.
Although net sales for the period declined 5.2% year-over-year to $233.6 million and came in $12.8 million below analysts’ expectations, this was largely due to lower selling prices for tree nuts resulting from the pass-through of reduced commodity acquisition costs.
Indeed, overall demand held up well as a solid 9.9% increase in sales volume in JBSS’s Consumer distribution channel (which accounted for 78.2% of total volume) more than offset volume declines of 23.6% and 14.1% in its Commercial Ingredients and Contract Packaging distribution channels.
The volume declines resulted from the COVID-19-related decline in air travel, nationwide restrictions on indoor restaurant dining sales and decreased convenience store foot traffic, and drove a 1.8% rise in total volume for the quarter.
Combined with the benefits of the above-mentioned decline in commodity acquisition costs for tree nuts and lower interest expense, this led to a nice 13.2% rise in earnings to a record $1.72 per share, which comfortably beat the $1.52 per share consensus forecast.
What’s more, while the ongoing trend of people doing more cooking and baking at home clearly continues to have a favorable impact on volumes in its Consumer business, demand in its other businesses is also improving.
In particular, JBSS noted that its worst performing food service business saw sales volume down 29.4%, which is a marked improved from the precipitous 63.3% year-over-year drop it had to endure just two quarters earlier.
When you couple this with the decrease in acquisition costs the company has seen for all major tree nuts, we think JBSS has put itself in excellent position to enjoy solid bottom-line growth for the remainder of the fiscal year as well. If so, we see additional upside for the stock ahead.
