J.M. Smucker: The Blue-Chip Stock
J. M. Smucker Co. had previously projected a gain of 1% has now tumbled the most in more than four years after the company cut its annual sales forecast, though the packaged-food company said cost cuts would help it meet its full-year earnings target. For Investors considering a purchase of J.M. Smucker Co. (Symbol: SJM) shares, BNK invest advises: commit to Buy J.M. Smucker Co. at $130, earn 5.2% annualized using options.
It has been hit by the sluggish demand for pet food where excluding their one-time items, revenue will range from flat to down 1% this year. Smucker may have overlooked the challenges it faces after becoming a major pet-food seller as consumers notice the company finding it hard to adjust to the market.
The company tried their hand at a new push into this industry last year where they acquired the 'Big Heart Pet Brands' at a deal valued at about $5.8 Billion. Which was to help them add more to their repertoire apart from their existing namesake jam. But, sales from this business declined the last quarter after the company decreased their market spending and as more and more U.S. pet owners moved to bigger premier brands.
The company may have invested this money seeking a higher profit, but so far it doesn't seem to be going their way. The unit definitely seems to be struggling, said an analyst at Bloomberg Intelligence.
“These products have been in decline since they made the acquisition, and there doesn’t seem to be an end in sight,” he said. “They have to prove they can turn this around.”
The shares dropped as much as 8.8% to $142.55, hitting the biggest intraday decline since February 2012.
In recent times, the packaged-food makers have lost a lot of their customers. Shifting away from staples that have been dominating the market for decades since their discovery, the consumers move on to seek for more fresh and natural grocery items. The latest move by Smucker of acquiring Big Heart was to help diversify its range while thinking they were immune to such market pressures.
Smucker is now working towards meeting the needs of the changing consumers and their tastes by launching a range of new TV ads which are a bid to help improve their sales and market share.
“We continue to progress,” Smucker said on a conference call. The company sees opportunities in “mainstream pet-food driven by consumer preference for additional protein and natural ingredient options.”
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