J.M. Smucker Co (NYSE:SJM) is likely to continue outperforming center store food peers as the company is “executing where peers struggle,” with further upside from potential Hostess divestiture, according to Bank of America analyst Peter Galbo
The J.M. Smucker Analyst: On the heels of its fiscal fourth-quarter report, Galbo maintained his Buy rating for J.M. Smucker. He also raised the price target from $130 to $132.
The J.M. Smucker Thesis: Despite significant macro headwinds, the company guided fiscal 2027 earnings at $10 per share at the midpoint, Galbo said in the note.
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J.M. Smucker’s flat net sales guidance for the first quarter of fiscal 2027 appears conservative, given that the Nielsen scanner data for May suggests around 5% year-on-year growth, the analyst stated.
The guidance reflects that low-single-digit pricing growth is offset by volume and mix, while coffee deflation could have a stronger impact starting in the fiscal second quarter, he added.
For adjusted earnings growth, management expects:
- Mid-teens growth in the first quarter
- Accelerate above mid-teens in the second quarter
- Decelerating to low-single-digit growth in the third quarter
- Flat to slightly down in the fourth quarter
Strong Fundamentals: The company’s balance sheet is strong and cash flow generation consistent, with fiscal 2027 guidance of around $1 billion in free cash flows, Galbo noted.
Management indicated that share buybacks may be reconsidered after the debt paydown of around $500 million, he added.
“Capital allocation remains focused on sustaining FCF through reinvestment, modest dividend growth, and deleveraging, with M&A sidelined near term,” the analyst wrote. Buybacks are more likely in fiscal 2028, he further stated.
JM Price Action: Shares of J.M. Smucker had risen by 2.89% to $115.64 at the time of publication on Wednesday.
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