Hilliard Lyons on Smucker

From Barron’s, here’s Hilliard Lyons on Smucker (SJM):

Our two-year price target on Smucker is lowered by $10 to $130 per share.

Smucker (ticker: SJM) shares are trading at 13.8 times our fiscal 2018 earnings-per-share estimate (excluding amortization and nonrecurring items). This is below an 18.5 times figure one year ago and a 10-year average forward multiple of 16.4 times. Our outlook assumes negligible EPS growth this year, improving to upper single-digit growth in subsequent years. We assume some valuation expansion from the current level.

We rate Smucker shares at Long-term Buy. We consider the company a high achiever, with notable histories of both organic and external growth. Given some expected near-term earnings pressure, but a more favorable outlook over the next few years, we believe our Long-term Buy rating is most appropriate. Our new two-year price target of $130 is based on a slightly lower future EPS assumption. We still assume negligible EPS growth in fiscal 2018 and mid- to upper-single-digit growth in fiscal 2019 and fiscal 2020. Our target is based on a price/earnings multiple of 14.3 times applied to a fiscal 2020 EPS estimate of $9.10; both of these figures are below our previous assumptions. The assumed 14.3 times multiple is above the current depressed multiple of 13.8 times, based on our fiscal 2018 EPS estimate, but is still well below the historical average.

Posted by on August 29th, 2017 at 2:36 pm


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