Credit Suisse Spreads Some Love To Smuckers After Strong Start To The Year

Nielsen’s retail sales data suggest J M Smucker Co SJM has made a good start to the fiscal year.

Credit Suisse’s Robert Moskow maintains an Outperform rating on the company, while raising the price target from $156 to $158.

Moskow mentioned that recent conversations with management had raised confidence in J M Smucker’s ability to increase its cost savings targets further.

Good Start To 1Q

According to the Nielsen data, “Despite difficult comparisons to last year's coffee results, U.S. retail takeaway grew 1 percent in May with solid gains in peanut butter, pet treats, shortening, and spreads,” the analyst stated.

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Coffee was flat despite the touch comp to 8 percent growth from a year ago, when there was heightened promotional activity related to the Dunkin k-cup launch.

Despite coffee sales being flat and promotional activity having declines, Moskow expects J M Smucker’s margins to continue to expand.

Cost Savings Target

Management raised its cost saving target by $50 million to $250 million, while announcing the closure of three manufacturing units, as well as additional upside from restructuring the organization.

“Along with closing the Pittsburgh pet food headquarters and consolidating the U.S. Consumer and Coffee business units into one, the company strengthened its functional capabilities by giving its Senior VP of Growth and Innovation, Geoff Tanner, responsibility for e-commerce and ‘revenue management’,” Moskow said.

The EPS estimates for FY17 and FY18 have been raised by $0.01 each.