Back to top

Image: Bigstock

Smucker (SJM) Looks Scrumptious on Buyouts & Digital Efforts

Read MoreHide Full Article

The J. M. Smucker Company SJM has been gaining from continued contributions from strategic buyouts and partnerships as well as strength of its brands. This, along with focus on innovation, e-commerce growth and cost-savings bodes well for the company.

Moreover, analysts look optimistic regarding the stock’s performance. The Zacks Consensus Estimate for fiscal 2020 earnings inched up by a cent to $8.21 per share in the past 30 days.

Before discussing the company’s growth drivers, it is worth noting that Smucker recently announced initiatives to offer monetary relief and protection to its employees as the world continues to strive against the coronavirus menace. Among other moves, the company is giving up to 12 weeks of full salaries along with other benefits to its workers whose production or distribution sites are shut due to the coronavirus pandemic. Apart from this, Smucker is pledging $300,000 as donations to various organizations to support them in their fight against the novel coronavirus.


What’s Driving Smucker’s Growth?

Smucker actively pursues strategic acquisition that helps the company to add iconic brands to its portfolio and strengthened presence across regions. We note that the company’s acquisition of Ainsworth (completed in May 2018) has been aiding performance in the U.S. Retail Pet Foods category. Other noteworthy acquisitions of the company include; Big Heart Pet Brand (pet food maker), Sahale Snacks (branded nut and fruit snacks maker), Enray Inc. (manufacturer of organic, gluten-free ancient grain products) as well as coffee brands and business operations of Rowland Coffee among others.

Additionally, Smucker has formed key partnerships with quite a few coffee companies. Smucker’s agreement with Keurig Green Mountain (KGM) and Dunkin’ Brands Group, Inc, to manufacture and sell the K-Cup category of products, has been yielding positive results. In this regard, the company has been consistently extending partnership with KGM to augment K-Cup business opportunities. Notably, the company recorded 7% sales growth for all K-Cup brands in third-quarter fiscal 2020.

Further, Smucker’s efforts to enhance its robust brands by accelerating marketing activities have been boosting its portfolio.Notably, marketing spend for the third quarter was 6.1% of net sales. Also, the company is on track with building a new production facility for one of its fastest growing brand, Uncrustables.

Apart from these, growing trend of online customers urged Smucker to take notice of its e-commerce channel to boost sales. In fact, e-commerce is a fast-growing retail channel of the company. In the digital realm, the coffee and pet food categories have been steadily expanding. We note that during third-quarter fiscal 2020, e-commerce sales improved double-digits and contributed 5% to total U.S. retail sales. Management expects to continue gaining from increasing online sales in the forthcoming periods.

Moreover, Smucker resorts to cost savings in order to fuel investments and enhance operating performance. In fiscal 2019, the company delivered savings of nearly $30 million through the right-spend program. Going ahead, management is focused on cost reduction and optimization efforts to ensure greater profitability.

We note that this Zacks Rank #2 (Buy) stock has increased 6.6% in the past six months against the industry’s decline of 8.1%.

Other Solid Food Stocks

Campbell Soup Company CPB, with a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 7.2%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Mills, Inc. GIS, with a Zacks Rank #2, has a long-term earnings growth rate of 7%.

Conagra Brands Inc. CAG, with a Zacks Rank #2, has trailing four-quarter positive earnings surprise of 0.61%, on average.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>