SJM - J.M. Smucker shakes off bear call from Morgan Stanley as pricing strength leads to upgrade

Morgan Stanley upgraded J.M. Smucker ( NYSE: SJM ) to an Equal-weight rating after having it slotted at Underweight.

Crucially, analyst Pamela Kaufman said the food company is seeing minimal demand elasticity in SJM’s portfolio to erase the former bear thesis that the portfolio was disadvantaged given its exposure to slower growth segments in its respective categories.

Kaufman and team expect SJM to continue to benefit from stable growth in food at home consumption. "SJM is seeing private label gain share across its portfolio (coffee, pet food/treats), but the company is also growing share in R&G coffee and pet treats and has seen moderating share declines in dog food," noted Kaufman. The Ohio-based company is also observed to have delivered improving execution in recent periods, while EPS growth in FY24 is expected to be supported by lapping the recall of Jif peanut butter.

For FY24, SJM is forecast to grow EPS 11.4% and trade in-line with Morgan Stanley's target multiple for center-store peers of 12.0X 2024 EV/EBITDA estimates. Putting pencil to paper, Morgan Stanley upped its price target on SJM to $158 from $135. The food stock hit a 52-week high of $157.24 on Monday.

Read an overview of J.M. Smucker's Investor Day presentation.

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