Goldman On JM Smucker: 'Fundamental Concerns Clash With Elevated Expectations,' Downgrade To Sell

Shares of J M Smucker Co SJM were trading down more than 3.75 percent on Monday, after analysts at Goldman Sachs downgraded the stock from Neutral to Sell, establishing a 12-month price target of $120.00. This implies considerable downside from Friday’s closing price of $32.50 – versus an expected 5 percent upside for the firm’s food coverage.

In addition to the demotion, the analysts lowered estimates ahead of what they think will be “a negative estimate revision cycle as fundamental challenges in its core and recently acquired businesses mount.”

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The experts envision 4-10 percent downside risk to consensus EPS estimates for fiscal 2017 (ongoing) and fiscal 2018 and 4 to 7 percent downside risk to EBITDA estimates. Moreover, the analysts believe J M Smucker “faces long-term challenges as consumers in its core coffee and recently acquired pet food categories premiumize away from it and expect these issues to become apparent as near-term benefits of recent distribution wins and input cost relief fade."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.