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Why an SJM Stock Recovery May Not Happen Soon

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Stock performance so far

J.M. Smucker (SJM) stock has fallen ~13.3% on a YTD (year-to-date) basis as of September 18, 2017. Much of this decline is due to the company’s sluggish fiscal 1Q18 results and tepid outlook. SJM stock has fallen 6.6% since it reported dismal fiscal 1Q18 results on August 24.

SJM has largely underperformed the S&P 500 Index (SPX) and the Consumer Staples Select Sector SPDR ETF (XLP), which have risen 11.8% and 6.9%, respectively, YTD.

SJM also lags behind most of its peers in terms of price performance. Tyson Foods (TSN), Hershey (HSY), and McCormick (MKC) have generated positive growth of 9.3%, 6.1%, and 6.0%, respectively, YTD.

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Although the share prices of several other food manufacturers are trading in the red on a YTD basis, their rates of decline have been lower than that of SJM stock. For instance, Kraft Heinz (KHC), Kellogg (K), General Mills (GIS), and Conagra Brands (CAG) stocks have fallen 6.8%, 6.9%, 8.6% and 11.8%, respectively.

What’s restricting SJM’s recovery?

J.M. Smucker’s falling sales and profitability and its challenging near-term outlook appear to have made investors wary about the prospects of the company going forward. The analyst target price reductions and rating downgrades for the stock haven’t helped.

SJM is projected to report sluggish sales and EPS (earnings per share) in coming quarters as lower volumes and mix, unfavorable coffee pricing, and increased competition in the Pet segment are all expected to impact its financials and, in turn, its share price adversely.

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