On Thursday, TD Cowen adjusted its outlook on shares of J.M. Smucker (NYSE:SJM), reducing the price target to $132 from $135 while keeping a Buy rating on the stock. The adjustment follows the company's first-quarter earnings per share (EPS), which surpassed estimates, and organic sales growth of 1%, aligning with expectations.
However, the snack brand Hostess, part of J.M. Smucker's portfolio, did not meet performance forecasts, prompting management to revise down the sales and EPS guidance for the fiscal year 2025.
The revised guidance reflects the challenges J.M. Smucker is expected to face throughout the year. Despite the lowered forecast, TD Cowen believes that the new estimates present a more accurate representation of the headwinds the company is encountering. The firm suggests that the updated guidance has reduced the investment risk for the remainder of the fiscal year.
The analyst from TD Cowen highlighted the attractiveness of J.M. Smucker's stock based on its current price-to-earnings (P/E) ratio, which stands at 11.1 times. This valuation is considered by the firm to offer a sufficient buffer against potential further declines in EPS, even if the company needs to reinvest earnings.
The firm's stance on J.M. Smucker remains positive, with the maintained Buy rating indicating confidence in the stock's potential despite the recent adjustments in the company's financial outlook. The new price target of $132 reflects the firm's recalibrated expectations following the latest developments.
In other recent news, J.M. Smucker reported a significant beat in first-quarter earnings for fiscal year 2025, despite a subsequent decrease in its sales and earnings per share forecast. The company's CFO, Tucker Marshall, revised the full-year 2025 comparable sales growth outlook to 9%, citing inflation's impact on discretionary spending.
The gross profit margin is expected to be 37.5% for the year due to green coffee cost increases necessitating pricing adjustments. Citi maintained a Buy rating on the company's shares, despite reducing the price target to $136 from $138. The firm's analysis noted that J.M. Smucker plans to invest less in certain areas of its portfolio, particularly dog treats and sweet baked snacks, based on broader market trends.
Despite these adjustments, Citi sees potential for J.M. Smucker to achieve above-average earnings growth over time. The company remains optimistic about ongoing momentum in its base business, cost savings, synergies, and debt reduction to drive earnings growth.
However, the company also reported lower earnings per share due to rising green coffee costs and a $40 million reduction in full-year expectations for the Hostess brand due to derisking efforts. These are the recent developments in the company's operations.
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