Executive Summary

Q2 FY25 delivered 17% net sales growth to $2.27B and 7% adjusted EPS growth to $2.76; GAAP EPS was a loss of $0.23 driven by a $260.8M pre-tax loss on the Voortman disposal group, while adjusted operating margin expanded 170 bps to 21.6% .
Organic momentum came from Uncrustables, Meow Mix, Café Bustelo and Jif; Coffee margins remained strong this quarter, but management guided for lower coffee margins in H2 on higher green coffee costs and elasticity from two rounds of price increases .
FY25 guidance raised at the midpoint for adjusted EPS to $9.70–$10.10 (from $9.60–$10.00), with net sales growth maintained at 8.5%–9.5%; FCF and capex unchanged at ~$875M and $450M, respectively .
Near-term drag: Hostess/Sweet Baked Snacks underperformed expectations amid pressured discretionary spend and execution gaps; management is accelerating display, packaging refresh, targeted value packs, and a new marketing campaign starting early CY2025 to reaccelerate growth .
Potential stock catalysts: execution updates on Hostess turnaround, Uncrustables capacity ramp (Alabama facility now online), coffee pricing/elasticity progression, and Investor Day disclosures in December .

What Went Well and What Went Wrong

What Went Well
- “We delivered organic net sales and earnings growth above our expectations with strength from the Uncrustables, Meow Mix, Café Bustelo, and Jif brands” — Mark Smucker (CEO) .
- Adjusted operating income +27% YoY; adjusted gross profit +17% with favorable mix/pricing and Hostess contribution; adjusted OI margin reached 21.6% .
- Free cash flow of $317.2M vs $28.2M last year; trailing 12-month adj. EBITDA ~ $2.0B (pro forma ~$2.1B) with a deleveraging plan to ≤3.0x net debt/EBITDA by FY27 .
What Went Wrong
- GAAP EPS turned to a loss from a $260.8M pre-tax loss on the Voortman disposal group; effective tax rate spiked to 136.7% due to held-for-sale classification (excluded from adjusted rate) .
- Sweet Baked Snacks (Hostess) net sales and profit were below expectations; discretionary softness and execution issues (distribution/merchandising) weighed, prompting accelerated corrective actions .
- Pet Foods net sales -4% YoY on higher trade spend and lower contract manufacturing, though segment profit rose 25% on lower costs and favorable mix; analyst concerns remain on treating softness and elasticity risk .

Financial Results

Metric	Q4 FY24	Q1 FY25	Q2 FY25
Revenue ($USD Millions)	$2,205.7	$2,125.1	$2,271.2
GAAP Diluted EPS ($)	$2.30	$1.74	($0.23)
Adjusted EPS ($)	$2.66	$2.44	$2.76
Gross Margin (%)	41.4%	37.5%	39.0%
Adjusted Gross Margin (%)	40.3%	39.2%	38.7%
GAAP Operating Margin (%)	18.4%	16.4%	7.5%
Adjusted Operating Income ($M)	$461.6	$447.9	$490.6
Adjusted OI Margin (%)	20.9%	21.1%	21.6%

Segment breakdown – Q2 FY25

Segment	Net Sales ($M)	Segment Profit ($M)	Margin	YoY Change
U.S. Retail Coffee	$704.0	$202.7	28.8%	Net sales +3%, profit +19%
U.S. Retail Frozen Handheld & Spreads	$485.2	$116.1	23.9%	Net sales +5%, profit -10%
U.S. Retail Pet Foods	$445.4	$121.4	27.3%	Net sales -4%, profit +25%
Sweet Baked Snacks	$315.5	$70.6	22.4%	Below plan; no prior-year comp
International & Away From Home	$321.1	$68.0	21.2%	Net sales -1%, profit +13%

KPI snapshot – Q2 FY25

KPI	Q2 FY25
Cash from Operations ($M)	$404.2
Free Cash Flow ($M)	$317.2
Net Interest Expense ($M)	$98.7
Trailing 12-mo Adj. EBITDA (~$B)	~$2.0; pro forma ~$2.1
Leverage (Net Debt/EBITDA)	~3.9x; target ≤3.0x by FY27
Weighted Avg. Diluted Shares (M)	106.7

Notes on drivers:

Comparable net sales +2%: +2 pts volume/mix (Uncrustables, Meow Mix, Café Bustelo, Jif), +1 pt price (Folgers), partially offset by lower pet co-manufacturing and Dunkin’ declines .
GAAP loss driven by $260.8M pre-tax loss on Voortman held-for-sale classification; adjusted results exclude this and other special items .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth vs PY	FY25	8.5%–9.5% (Q1 update)	8.5%–9.5%	Maintained
Adjusted EPS	FY25	$9.60–$10.00 (Q1 update)	$9.70–$10.10	Raised midpoint by $0.10
Adjusted Gross Margin	FY25	~37.5% (Q1 update)	~37.5%–38.0%	Modestly higher range
SD&A Growth	FY25	~+9% (Q1 update)	~+9%	Maintained
Interest Expense	FY25	~$400M (Q1 update)	~$400M	Maintained
Adjusted Effective Tax Rate	FY25	24.3% (Q1 update)	24.3%	Maintained
Free Cash Flow	FY25	~$875M (Q1 update)	~$875M	Maintained
Capital Expenditures	FY25	~$450M (Q1 update)	~$450M	Maintained

Context vs initial FY25 guide (Q4 FY24): Initial guide was net sales +9.5%–10.5%, adj. EPS $9.80–$10.20, FCF $900M; cut in Q1 and EPS midpoint raised in Q2 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24 and Q1 FY25)	Current Period (Q2 FY25)	Trend
Coffee pricing & commodity inflation	Lower coffee net pricing in Q4 FY24; Q1 FY25 added a second price increase planned for October due to higher green coffee costs; modeled elasticity assumptions	Two rounds of pricing now in place; Q2 coffee net sales +3% and profit +19%; management expects coffee margins to compress in H2 from mid/high 20s to low/mid 20s on higher costs and elasticity	Deteriorating margins in H2; monitoring elasticity
Uncrustables capacity & growth	Ongoing growth and capacity expansions; $1B ambition by FY26	Alabama plant opened; Uncrustables net sales expected to exceed $900M in FY25; record sales/household penetration; new flavors and seasonal launches	Strengthening; capacity-led growth
Sweet Baked Snacks (Hostess) execution	Noted category/channel pressures and revised FY25 top line; early callouts to moderate expectations	Below plan; drivers: cautious consumer and execution gaps; actions: displays, marketing (early CY25), packaging refresh, value packs, away-from-home expansion, cross-promotions	Stabilization plan underway; near-term headwinds
Pet snacks/cat food	Q4 FY24: pet mix/pricing tailwinds; Q1 FY25: treating slowed, Milk-Bone modest growth, Meow Mix strong; restoring trade on Meow Mix	Pet net sales -4% on lower trade pricing and co-manufacturing; segment profit +25% on lower costs/mix; continued discretionary softness in treating acknowledged	Mixed: profit strength, volume softness
Deleveraging & capital allocation	Initial plan post-Hostess to delever; FY25 interest ~$400M	TTM adj. EBITDA ~$2.0B (PF ~$2.1B); leverage ~3.9x; target ≤3.0x by FY27; plan ~$500M annual debt paydown plus Voortman proceeds	Improving balance sheet trajectory

Management Commentary

“Our strong second quarter performance demonstrates the strength of our categories and continued execution toward our key growth platforms… strength from the Uncrustables, Meow Mix, Café Bustelo, and Jif brands.” — Mark Smucker, CEO .
“We are not satisfied with the current results of the Hostess brand and are taking the necessary actions to return the brand to growth… displays, a bold new marketing campaign, packaging refresh, innovation, and value packs… accelerated to begin in the first quarter of calendar 2025.” — Mark Smucker .
“Adjusted earnings per share exceeded our expectations… driven by better-than-anticipated adjusted gross margin and timing of SD&A expenses.” — Tucker Marshall, CFO .
“Our trailing 12-month adjusted EBITDA is approximately $2 billion… proforma approximately $2.1 billion… leverage ratio of 3.9x… plan to pay down approximately $500 million of debt annually… anticipate a leverage ratio at or below 3x by the end of fiscal year 2027.” — Tucker Marshall .

Q&A Highlights

Q3 topline outlook flat YoY due to second-round coffee pricing elasticity, tough pet comps and reduced co-manufacturing; offset by growth in frozen handheld/spreads .
Hostess: FY25 implies low-single-digit H2 decline improving sequentially via better execution and easier comps; cost synergy target $100M by FY26 intact .
Coffee outlook: two rounds of pricing implemented; commodity market volatility noted; management will balance pricing and affordability; expect flat coffee in Q3, growth in Q4 .
Pet treating: category discretionary pressure persists; Milk-Bone innovation (peanut buttery Bites with Jif) performing well; no notable retailer destocking .
GLP‑1: no material portfolio impact to date; ongoing innovation and portion control provide mitigation levers .

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY25 (revenue/EPS/EBITDA) was unavailable due to a temporary S&P Global daily request limit. As a result, we cannot provide a definitive “vs Street” comparison for the quarter at this time. The company did state results exceeded internal expectations and raised FY25 adjusted EPS guidance midpoint by $0.10 .

Key Takeaways for Investors

Core brands are driving high-quality growth; Uncrustables remains a standout with capacity now in place to exceed $900M in FY25 and target $1B in FY26, offering a durable growth vector within the portfolio .
Coffee will be the swing factor in H2: higher green coffee costs and elasticity from two rounds of pricing point to margin pressure; track category elasticity, competitive follow-through, and pace of cost normalization .
Hostess underperformance is being addressed through accelerated commercial execution (displays, marketing, packaging refresh, value tiers) and channel expansion; watch early CY25 campaign impact and away-from-home penetration as catalysts .
Strong cash generation and a credible deleveraging path (≤3.0x by FY27) support valuation resilience and optionality for capital deployment as synergies flow through .
Pet segment profitability is improving on cost and mix despite volume softness; sustaining Milk-Bone/Meow Mix momentum while managing trade spend is key to protecting margins .
FY25 outlook de-risked: adj. EPS raised; net sales unchanged; cost discipline and timing of SD&A/marketing aided Q2; monitor Q3 guide (flat sales; mid-single-digit EPS decline) for execution signals .
Upcoming Investor Day in December and ongoing Hostess updates could reset sentiment if execution improvements translate into visible sell-through and distribution gains .

Appendix: Additional Context

Q2 headlines: net sales $2.27B (+17%), adjusted EPS $2.76 (+7%); GAAP loss per diluted share ($0.23) due to Voortman held-for-sale loss; adjusted OI $490.6M (+27%) .
Free cash flow $317.2M; CFO guidance for FY25 FCF ~$875M and capex ~$450M unchanged .
Segment color: Coffee +3% net sales (price-led, favorable elasticity vs plan); Frozen & Spreads +5% (Uncrustables/Jif volume; lower net price realization from higher trade); Pet -4% net sales but +25% profit (lower costs, mix); International & AFH -1% net sales, +13% profit .

Non-GAAP note: Adjusted results exclude amortization, divestiture gains/losses (incl. Voortman held-for-sale loss), special project costs, and changes in unallocated derivative gains/losses; reconciliations provided by the company .

J M SMUCKER Co (SJM)·Q2 2025 Earnings Summary