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Wells Fargo Downgrades J.M. Smucker (SJM) on Slow Growth in Single Serve Coffee

December 5, 2013 7:50 AM EST Send to a Friend
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Price: $102.36 --0%

Rating Summary:
    6 Buy, 10 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 2 | Down: 3 | New: 7
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Wells Fargo downgraded J.M. Smucker (NYSE: SJM) from Market Perform to Underperform with a price target of $92-$94 (from $102-$104). Analyst John Baumgartner thinks single serve coffee is slowing and expressed caution about the overall consumer environment.

"We maintain that SJM is among those most at risk (with (NYSE: CPB)) within a challenging consumer environment and note that: 1) coffee growth is slowing sharply within single-serve and 2) cost deflation benefits are poised to moderate while recent benefits are weakened by lower prices at retail," said Baumgartner.

"Retail Coffee has benefitted from double-digit growth of Keurig (Nasdaq: GMCR) single serve and Dunkin' Donuts (Nasdaq: DNKN) bagged coffee; a combined 30% of Smucker's measured channel coffee sales. However, in CY13 K-Cups have been impacted by new entrants TreeHouse Foods (NYSE: THS) (private label) and Kraft (Nasdaq: KRFT) (Maxwell House and Gevalia) and despite reduced guidance for FY14 y/y K-Cups sales (now +MSD vs. +15% prior), we believe negative risk persists and model flattish growth. Kraft is launching new SKUs and retailers are accelerating store brand penetration into peak consumption season," he said.

For an analyst ratings summary and ratings history on J.M. Smucker click here. For more ratings news on J.M. Smucker click here.

Shares of J.M. Smucker closed at $104.75 yesterday.




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