“It’s Time to Buy Smucker”

From Barron’s:

Famed for its namesake line of jellies, Smucker (ticker: SJM) is facing challenging problems in the grocery aisle.

Changing consumer tastes have some shoppers looking for fresher fare at the likes of Trader Joe’s and Whole Foods Market (WFM), while others are scouring discount stores in search of rock-bottom prices. Either way, it’s a pickle for the company that makes Folgers coffee, Pillsbury cake mixes and Jif peanut butter.

Expect more uncertainty if Amazon.com’s (AMZN) $13.2 billion deal for Whole Foods goes through. All this helps explain why Smucker shares have fallen by more than 25% in the past year. But it doesn’t justify the severity of the selloff.

Is it time to nibble? We think so. In fact, we recommend a hearty bite.

Fetching a forward price-to-earnings multiple of less than 14.4 times earnings, Smucker trades at a 19% discount to its historical average. Moreover the stock, at $114.45, offers a market-beating 2.6% dividend yield.

Tuesday morning, Hilliard Lyons analyst Jeffrey Thomison upgraded Smucker from Neutral to Long-term Buy, arguing that the valuation had fallen to attractive levels. Over the next two years, he sees the stock rising almost 22% to $140 a share as earnings growth accelerates. Thomison says Smucker is in a “relatively competitive position with its strong, leading portfolio of brands.”

Posted by on July 12th, 2017 at 11:05 am

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