Morgan Stanley upgraded the stock saying that J.M. Smucker‘s reinvestment strategy is working.
“We are more constructive on SJM‘s FY2020 outlook given improving momentum in coffee and pet, which represent 65% sales/80% EBIT. SJM’s measured channels sales growth is accelerating (+2.4% in L12W vs. 1.3% L52W) due to its sharpened innovation strategy (Folgers 1850, Power Ups, pet treats), improving roast & ground (“R&G”) share trends, strong momentum in single-serve coffee, solid growth within dog/cat food, and higher pricing in pet. These trends are partly offset by elevated competition in peanut butter (~12% of sales), which we expect to weigh on FY2020 results. In addition, SJM’s commitment to increase marketing spend to over 7% of sales (vs. 5-6% historically) should support improved topline performance. We expect SJM to return to positive organic growth in FY20 after posting flat to declining growth over the prior three years and are raising our organic sales growth outlook for FY2020 by 50 bps from 0.6% to 1.1%. After several years of below expectation results, we believe SJM’s reinvestment strategy will drive improved topline momentum and delivery on the FY2020 outlook. We upgrade SJM from UW to EW and raise our PT from $104 to $117.”