J. M. Smucker Company (SJM): Price defines bullish 'flag' consolidation

Posted Aug 29th 2008 12:02PM by Larry Schutts
Filed under: Earnings Reports, ConAgra Foods (CAG), Procter and Gamble (PG), Technical Analysis, Stocks to Buy

The J. M. Smucker Company (NYSE: SJM) is a leading North American maker of fruit spreads, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages. Company brand names include Smucker's, Jif, Crisco, Eagle Brand, Hungry Jack, Laura Scudder and Robin Hood. The firm also markets Pillsbury, Pillsbury Doughboy, Carnation, Borden, and Elsie brand products under license. ConAgra Foods (NYSE: CAG) is a major competitor.

Smucker pleased investors earlier in the month, when it reported fiscal Q1 EPS of 82 cents and revenues of $663.7 million. Analysts had been looking for 77 cents and $647.2 million. Management also guided FY09 EPS to $3.45-$3.50 ($3.44 consensus) and FY09 revenues to $3.8-$4.0 billion ($3.86B consensus). The outlook figures take into account the previously announced purchase of Procter & Gamble's (NYSE: PG) Folgers coffee business.

The SJM share price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy", one "buy", two "holds" and one "underperform". The SJM P/E ratio (17.41), Price to Sales ratio (1.12), Price to Book ratio (1.56), Price to Cash Flow ratio (12.25) and Sales Growth rate (18.20%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 55% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past fifty-two weeks, it has traded between $40.18 and $56.69. A stop-loss of $47.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Tags: flag, fundamental analysis, FundamentalAnalysis, J.M. Smucker Company, J.m.SmuckerCompany, momentum, SJM, technical analysis, TechnicalAnalysis