J.M. Smucker's Q1 Performance Outshines Peers: Analyst Spotlights Strong Brands, Leverage & Category Reach

Stifel analyst Matthew E. Smith reiterated a Hold rating on J.M. Smucker Company SJM, lowering the price target to $150 from $160. 

The company reported Q1 adjusted EPS of $2.21, beating the consensus of $2.04.

The analyst thinks the top-line momentum and volume growth is a stand-out performance relative to its peers, which are plagued by a weak volume environment even as pricing wanes. 

The outperformance relative to peers is supported by Smucker's improved category exposure and strong brands following its portfolio management, Smith notes.

Following the Q1 results, the analyst raised the FY24 estimate to $9.69, up by $0.13 from the previous estimate, representing nearly 9% growth and standing just above the mid-point of the guidance range.

The target price, however, is lowered by assigning an 11.5x EV/EBITDA multiple to the FY24 estimate. This multiple places the company's shares at a slight premium to the company's U.S. packaged food peers.

According to the analyst, the company's balance sheet has significantly improved following Q1, supporting optionality to pursue M&A and share repurchase. 

The balance sheet currently stands at 2.6x leverage, and the analyst estimates the leverage to reach 2x net debt/EBITDA exiting the year, standing well below the company's target range.

J M Smucker raised FY24 adjusted EPS guidance from $9.20 - $9.60 to $9.45 - $9.85.

Price Action: SJM shares are trading lower by 1.57% to $143.65 on the last check Wednesday.