On Tuesday, Citi adjusted its stance on J.M. Smucker (NYSE:SJM), shares reducing the price target slightly to $138 from $139 while retaining a Buy rating on the stock.
The firm's analysis indicates an expectation of 0.5% growth in comparable sales for the first quarter of fiscal year 2025, which falls below the Visible Alpha consensus of 1.1%.
The anticipated shortfall in the Pet and Coffee segments is expected to be somewhat mitigated by stronger performance in the Frozen Handheld and Spreads segment.
The firm also noted potential downside risk for Hostess, which has not yet been included in comparable sales figures. Despite these concerns, Citi does not anticipate that a minor sales miss will significantly impact earnings per share (EPS).
They project an EPS of $2.19, which is two cents higher than the Visible Alpha consensus. The firm highlighted J.M. Smucker's consistent track record of surpassing consensus EPS estimates over the past 19 quarters, with over 9% outperformance on twelve occasions.
Citi's commentary included observations of several food companies with fiscal year ends in May and June, such as Conagra Brands (NYSE:CAG), General Mills (NYSE:NYSE:GIS), Kraft Heinz (NASDAQ:KHC), Mondelez (NASDAQ:MDLZ) International (NASDAQ:MDLZ), and McCormick & Company (NYSE:NYSE:MKC), which reported EPS upside driven by gross margin, even in cases where operating sales growth (OSG) was below expectations. This trend within the food industry suggests that J.M. Smucker may also experience a similar outcome.
InvestingPro Insights
Amidst the financial analysis provided by Citi, J.M. Smucker (NYSE:SJM) presents several noteworthy metrics that could influence investor decisions. The company's management has demonstrated a commitment to shareholder value through an aggressive share buyback strategy, which can be a positive sign of the company's confidence in its future prospects. Additionally, J.M. Smucker has a remarkable history of raising its dividend for 14 consecutive years, showcasing a reliable return to investors, a detail that complements Citi's positive outlook.
From a financial standpoint, J.M. Smucker's P/E ratio stands at 16.96, with an adjusted P/E ratio for the last twelve months as of Q4 2024 at 14.49, which may indicate a reasonable valuation compared to industry peers. The company's dividend yield is 3.57%, which is attractive for income-focused investors, especially considering the company's long history of dividend payments. Furthermore, the company has been profitable over the last twelve months, which aligns with analysts' predictions that J.M. Smucker will continue to be profitable this year.
Investors looking for more in-depth analysis and additional InvestingPro Tips can find further insights on InvestingPro, which includes a total of 6 tips for J.M. Smucker, offering a broader perspective on the company's financial health and future outlook.
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