Loss of Moat and Drop in Margins Drive a Lower FVE for Smucker; Shares Fairly Valued
Persistent secular headwinds have continued to plague Smucker’s businesses, eroding their brand intangible assets and strategic standing with retailers. As such, we revise the firm’s economic moat rating from narrow to none. Our fair value estimate falls to $101 from $126 as gross margins are squeezed by pricing pressure, higher brand investments are poised to ensue, and given we’ve shortened the time over which we forecast economic profits. In this vein, we still forecast sales growth of just l...Smucker (J.M.) manufactures and markets food and beverage products. The company's principal products are coffee, dog food, pet snacks, cat food, peanut butter, fruit spreads, frozen handheld products, shortening and oils, portion control products, juices and beverages, and flour and baking ingredients. The company has four reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods, and International and Away From Home. The U.S. retail market segments represent the sales of food and beverage products to consumers through retail outlets in North America. The International and Away From Home segment represents sales outside of the U.S. retail market segments.
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