Smucker (SJM) is More than Just Tasty Jelly - Barron's
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Price: $123.05 --0%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 3.7%
Revenue Growth %: +0.5%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 3.7%
Revenue Growth %: +0.5%
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Shares of J.M. Smucker (NYSE: SJM) are trading lower Wednesday, likely on the back of Proctor & Gamble's (NYSE: PG) move to trim its fourth-quarter outlook. But investors shouldn't be swayed, following a bullish report from Barron's.
More than just a jelly company, Smucker also makes things like Pillsbury cake mixes, Crisco shortening, and licenses Dunkin' Donuts coffee, among other items. The diversification, however, exposes it to a wide range of commodity fluctuation, both for good and bad.
In terms of some headwinds Smucker's Jif unit is suffering under rising peanut prices as well as its recent acquisition of the Sara Lee (NYSE: SLE) beverages business. One recent government report has peanut prices rising 39 percent in May versus the same period in the previous year. For the beverages business, input prices remained high while volumes fell 7 percent, leading to a 16 percent drop in operating margins.
For tailwinds, Smucker, along with peers, is benefiting from falling coffee prices. Since last year, costs have slipped 40 percent, with a 17 percent as recent as last month. Competitors will also be able to lower prices, but if volumes remain firm, than the improved margins will bolster profits.
Despite the mix, Smucker is still one of the best-known consumer brands out there. Shares are going for just 15 times next years earnings expectations, which is in-line with Kraft (NYSE: KFT) and lower than Heinz (NYSE: HNZ). Applied to EPS estimates of $5.61 for next year, and shares should move to around $85, an 11 percent gain to Tuesday's closing price of $76.54.
Investors will also get paid for the patience; Smucker currently pays a dividend of 48 cents each quarter, yielding 2.5 percent annually.
So, as expectations for a stronger peanut crop start sinking in, lower input costs and continued store presence should bode well for investors moving forward.
Shares are down about 0.6 percent Wednesday afternoon.
More than just a jelly company, Smucker also makes things like Pillsbury cake mixes, Crisco shortening, and licenses Dunkin' Donuts coffee, among other items. The diversification, however, exposes it to a wide range of commodity fluctuation, both for good and bad.
In terms of some headwinds Smucker's Jif unit is suffering under rising peanut prices as well as its recent acquisition of the Sara Lee (NYSE: SLE) beverages business. One recent government report has peanut prices rising 39 percent in May versus the same period in the previous year. For the beverages business, input prices remained high while volumes fell 7 percent, leading to a 16 percent drop in operating margins.
For tailwinds, Smucker, along with peers, is benefiting from falling coffee prices. Since last year, costs have slipped 40 percent, with a 17 percent as recent as last month. Competitors will also be able to lower prices, but if volumes remain firm, than the improved margins will bolster profits.
Despite the mix, Smucker is still one of the best-known consumer brands out there. Shares are going for just 15 times next years earnings expectations, which is in-line with Kraft (NYSE: KFT) and lower than Heinz (NYSE: HNZ). Applied to EPS estimates of $5.61 for next year, and shares should move to around $85, an 11 percent gain to Tuesday's closing price of $76.54.
Investors will also get paid for the patience; Smucker currently pays a dividend of 48 cents each quarter, yielding 2.5 percent annually.
So, as expectations for a stronger peanut crop start sinking in, lower input costs and continued store presence should bode well for investors moving forward.
Shares are down about 0.6 percent Wednesday afternoon.
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