On Thursday, CFRA made adjustments to its expectations for J.M. Smucker (NYSE:SJM), reducing the 12-month price target to $131 from the previous $137. This adjustment comes alongside the firm's decision to maintain a Hold rating on the stock.
The new stock target is set at a multiple of 13 times the forecasted earnings per share (EPS) for the fiscal year ending in April 2025, which CFRA has revised down to $10.07 from $10.16. For the following fiscal year, the EPS estimate is $11.27.
The company's fourth fiscal quarter adjusted EPS was reported at $2.66, remaining unchanged year-over-year but surpassing expectations by $0.33. Still, sales for the same period saw a slight decrease of 1% year-over-year to $2,206 million, falling short of the consensus by $38 million. CFRA attributes the revision in their target price to anticipated investments in the Uncrustables brand, which are expected to dampen EPS growth for FY 25.
Despite the near-term pressure on earnings, CFRA foresees potential for an "above-algorithm" year in FY 26. This optimism is based on brand momentum for products like Uncrustables, Meow Mix, and Milk Bone, as well as anticipated cost savings, the realization of synergies from the Hostess brand, reduced interest expenses, and the elimination of overhead costs associated with the prior year's divestiture of the dog foods segment.
Organic sales growth for FY 25 is expected to be around 3%, driven by pricing increases, particularly for coffee, and a 2% improvement in volume/mix.
CFRA highlights that it is uncommon for packaged food companies to experience volume/mix strength in the current consumer spending environment. Nonetheless, the firm also notes risks for J.M. Smucker, including a high leverage ratio of 4.9 times, a competitive promotional landscape, and ongoing challenges in key product categories such as coffee, peanut butter, and spreads. These factors contribute to CFRA's decision to continue with a Hold rating on the company's shares.
In other recent news, J.M. Smucker Company has reported an 8% increase in full-year net sales and an adjusted earnings per share (EPS) of $9.94 for Fiscal 2024. The company attributes this growth to strategic acquisitions and brand development, notably in coffee, snacking, and pet food categories. A significant contributor to this growth was the acquisition of Hostess Brands (NASDAQ:TWNK).
Looking ahead, Smucker anticipates a net sales growth of 2% and an adjusted EPS of $10.00 for Fiscal 2025, with further growth expected in Fiscal 2026. Despite a 1% decline in net sales in the fourth quarter, the company expects a high-teen percentage increase in net sales in the first quarter of Fiscal 2025.
However, higher commodity costs and expenses for a new Uncrustables facility may impact profit margins. The company plans to prioritize debt reduction while expecting adjusted EPS growth in Fiscal 2026. These are some of the recent developments within the company.
InvestingPro Insights
InvestingPro data reveals that J.M. Smucker (NYSE:SJM) holds a market capitalization of $12.24 billion, with a trailing twelve-month P/E ratio adjusted as of Q3 2024 at 15.63. This valuation comes despite recent revenue contraction, with a slight -1.45% change in the last twelve months as of Q3 2024.
Still, the company's dividend yield stands at an attractive 3.84%, reflecting a consistent dividend growth of 3.92% over the same period. These figures are particularly relevant to investors seeking stable income, as J.M. Smucker has a history of maintaining dividend payments for 54 consecutive years, a streak that is expected to continue given the company's commitment to shareholder returns.
Two InvestingPro Tips highlight the company's proactive financial management: J.M. Smucker has been aggressively buying back shares and has raised its dividend for 14 consecutive years. These actions demonstrate management's confidence in the company's financial health and its dedication to delivering shareholder value.
For investors looking for deeper insights and additional tips, there are more detailed analyses available on InvestingPro, which currently lists 6 additional tips for J.M. Smucker. These can be accessed at: https://www.investing.com/pro/SJM, and by using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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