J.M. Smucker Is Deutsche Bank's Top Food Pick Heading Into '16

Deutsche Bank recently issued its  2016 outlook on the Food Industry naming J.M. Smucker Co (NYSE: SJM) as its top pick based on a combination of increasing profitability, greater operational efficiency. Currently, J.M. Smucker is rated as a Buy while Deutsche Bank raised its price target from $130 to $137.

Eric Katzman, Mario Contreras, and Kanika Goyal, analysts at Deutsche Bank wrote, "Based on a combination of (1) a decent fundamental LT outlook for the new pet food business, (2) recovery in coffee profitability (3) additional LT cost savings potential, (4) high FCF efficiency, and (5) attractive valuation, we name Smucker as our top pick."

A key highlight from the report was J.M. Smucker's strength in the pet food sector. With a strong line of products and favorable trends including the increasing number of child-free households, increased pet snacking, and growing acceptance of pets as part of the family, Deutsche Bank believes that this area could be a major point of top line growth for J.M. Smucker going forward.

Looking ahead to the possibility of M&A for 2016, while no clear targets have been identified, J.M. Smucker has had a solid history of integration, with synergies being significant in recent years.

Based on this precedent Deutsche Bank believes that M&A could play a role in the company's growth for 2016 with integration being a strong advantage over peers in the highly competitive food industry.

Management noted this sediment at J.M. Smucker's Investor Day saying that the company was on track to achieve $200 million in pet food-related M&A cost savings by 2018.

Currently, J.M. Smucker is trading at $121.19, down 0.99 percent.