It's been a wild few days for Smuckers (NYSE:SJM), a lot wilder few days than probably should be expected for a company that made its fortune on jams and jellies. Its latest earnings report gave the company a lot of new gains, but considering how the last few days have looked, this may just be the start of a lot of strange fluctuations for the company.
An Earnings Report Sweet as Strawberry Jam
The earnings report should have been the start of something big, and in many ways, it was. The company was up 1.8% in pre-market trading, and it had every reason to be. The company posted earnings of $2.39 a share, which beat estimates of $2.23 a share rather nicely. Better yet, those earnings gains are actually up over this time last year, up 5.75% in fact.
Revenue posted a similar beat, as the company posted $2.034 billion in revenue, which beat the $2.01 billion estimated. That's also up from this time last year, representing 3.88% higher figures than the same time last year.
The good news for Smuckers was, overwhelmingly, that most of its products are specifically designed to be used at home. With restaurants still crippled or closed outright by local and state government mandates, the end result is that it's a lot tougher to operate, and those who supply restaurants and the like are hurt accordingly.
While Smuckers does have a foot in that water, many of its subsidiary brand names, like Jif peanut butter and Folgers coffee, are used in homes every bit as much—and likely more so—than in institutions. It certainly didn't hurt that, back in late October, the company got a nice $550 million infusion of cash when it sold the Crisco brand line to B&G Foods Inc. (NYSE:BGS), the company that owns not only Green Giant, but also a slate of other brands including Cream of Wheat.
Stable but Slipping Analyst Picture
Meanwhile, our latest research has discovered a mildly unnerving picture for Smuckers. Very mildly; the company is currently rated a “hold”, with two “sell” ratings, and nine “hold” going into the picture. That's the same as it was a month ago, and three months ago, the company had that same makeup but with one “buy” rating extra thrown in. Oddly, the consensus price target has been leaning upward over the last six months, going from $115.33 to $116.30, despite the fact that the company is losing buying interest.
In fact, there's been very little movement on this stock in analyst circles lately; the last time anyone made a change was back in mid-September, when Morgan Stanley shifted its price target from $114 to $106. Before that, the latest move was in late August, which suggests a surprising stability to Smuckers stock.
Buying in on Stability
Granted, looking at the ticker for Smuckers for any length of time might not suggest that this company is long on “stability”. The charts feature a ridiculous number of up-and-down swings, though these are all working within a fairly narrow range. The company closed out May around $107, and finished yesterday around $116. A year with the company has it trading between $100 and $120 almost continuously, and the only place you can see any truly large-scale price action is in the five-year chart, where it's been running between $100 and $160 after a brief flirtation with $155 a share back in 2016. That's good news for a long-term investor, and when you couple that on with the fact that Smuckers raised its dividend back in July from $0.88 to $0.90, that makes it even more attractive.
Granted, the company can only sell Crisco once, but Crisco was just a part of the overall picture. Reports note that this is in keeping with Smuckers' larger overall plan to leave baking behind and instead focus on coffee, snacks, and pet food. Granted, that doesn't seem like such a hot idea right now—remember the flour shortages back in April or so as home baking really took off?—but the circumstances that drove that home baking frenzy aren't likely sustainable.
So the long and the short of it is, we've got a company that's increasing its dividends, which is generally a good sign. We've got a company that's holding a fairly stable share price over a long term period. We've got a company that has a highly-diversified product line, so much so that it's divesting some products to achieve greater focus on a particular market segment. The end result means that Smuckers should be pretty attractive, because—to misquote the company's marketing—with a market plan like Smuckers, the stock has to be good.
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