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Smucker (SJM) Recalls Flour Products on Contamination Risk

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Per sources, a division of food manufacturer, The J. M. Smucker Company (SJM - Free Report) , announced that it is voluntarily recalling flour products on the grounds of contamination risk with E. coli 0121.

Smucker is working with the U.S. Food and Drug Administration to resolve the issue, though there are no reports of illness till date. The affected brands include specific production codes in the Golden Temple, Swad and Maya brands. This merchandise was made by Ardent Mills in Saskatoon, SK Canada, packaged in 20-pound paper bags, and was distributed to 19 distributors and two small retailers.

Of late, Smucker’s share price has been underperforming the Zacks categorized Food-Miscellaneous/Diversified industry for the past three months. The Zacks Rank #4 (Sell) stock declined 9.3% in comparison to the Zacks categorized industry, which recorded growth of 0.5%. Notably, the industry is part of the bottom 24% of the Zacks classified industries (201 out of the 265). The broader Consumer Staples sector is placed at the bottom 19% of the Zacks classified sectors (13 out of 16).

Estimates also dipped 0.1% to $7.64 for fiscal 2017 and 0.3% to $7.83 for fiscal 2018, over the past 60 days. We note that Smucker posted weak third-quarter fiscal 2017 results, where the bottom line met estimates, after posting positive surprises in the trailing six quarters. In addition, sales marked its third consecutive miss. Sales have been declining due to currency headwinds, poor coffee volumes, lower pricing and sluggish pet food sales. The recent increase in coffee prices will also adversely affect coffee volumes. Though the company remains optimistic on its acquisitions and innovation programs, and remains focused on improving the performance of the mainstream dog and cat brands, heightened competition in the pet food business in the near term remains a concern. Further, management expects top-line softness in the business and across the industry to negatively impact the company’s growth.

J.M. Smucker Company (The) Price, Consensus and EPS Surprise

 

J.M. Smucker Company (The) Price, Consensus and EPS Surprise | J.M. Smucker Company (The) Quote

Nevertheless, Smucker has been actively pursuing acquisitions in both the U.S. and overseas. The acquisition of pet food maker – Big Heart Pet Brand – in Mar 2015 opened up opportunities for the company to expand in the fastest growing pet food and snacks category in the U.S. Most recently, the company inked an acquisition agreement with one of North America's largest packaged food companies – ConAgra Brands Inc. (CAG - Free Report) – to acquire its Wesson oil brand for about $285 million in cash.

Of late, ConAgra has been selling non-core brands in an effort to focus on higher-margin, more contemporary and higher-performing company brands. Per Reuters, ConAgra Brands has also approached Pinnacle Foods, Inc. about a potential acquisition.

Despite having a Zacks Rank #4 (Sell), Smucker carries a VGM score of ‘B’ and a low beta of 0.58. This indicates that there is substantial potential in the stock.

Key Pick

A better-ranked food company includes SunOpta, Inc. (STKL - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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