SJM: Bearish Signals Emerge for The J. M. Smucker Company

The J. M. Smucker Company manufactures and markets branded food and beverage products, primarily in the U.S. and Canada. Its core offerings are categorized into U.S. Retail Coffee (including 'Folgers', 'Dunkin'', and 'Café Bustelo'), U.S. Retail Frozen Handheld and Spreads (featuring 'Uncrustables', 'Jif', and 'Smucker's'), U.S. Retail Pet Foods ('Meow Mix', 'Milk-Bone', 'Pup-Peroni', and 'Canine Carry Outs'), and Sweet Baked Snacks ('Hostess'). The company's products are sold to consumers primarily through retail outlets, including supermarkets, club stores, and online retailers. Smucker's differentiates itself through well-recognized brands, product quality, and innovation, focusing on satisfying evolving consumer trends and closely monitoring the price gap between its brands and private label offerings. They also leverage an integrated distribution network to reach a wide range of retail channels and foodservice distributors.

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SJM's technical outlook is mildly bearish. The stock has experienced a downtrend over the past 90 days, with a recent close at $103.60. The price action is below the 50-day SMA of $106.80 and the 21-day EMA of $104.35, confirming the short-term downward trend. The MACD at -1.07 is below its signal line, indicating bearish momentum. The RSI of 46.31 is also below 50, suggesting continued selling pressure. While the Stochastic %K at 39.90 is not yet oversold, it does not indicate any immediate buying interest. The ADX at 11.55 suggests a weak trend, but the negative ROC_20 at -3.17% points to a potential for further price declines. The stock is currently trading within its Bollinger Bands, but closer to the lower band, indicating potential for a breakdown. Overall, the technical indicators suggest continued weakness in SJM's price action over the next 1-3 months, with limited signs of a potential reversal.

The company's MD&A reveals a challenging quarter. `Net sales` decreased by 1% year-over-year to $2,113.3 million, compared to $2,125.1 million in the prior year; however, excluding divestitures and foreign currency exchange, net sales increased by 2%. The `Gross profit` margin significantly declined to 22.5% from 37.5% in the same period last year, driven by higher commodity costs and unfavorable volume/mix. `Net cash (used in) provided by operating activities` was negative $10.6 million for the three-month period ended July 31, 2025, a stark contrast to the $172.9 million provided in the prior year, primarily due to lower net income. Management notes continued input cost inflation and a 'dynamic macroeconomic environment' are expected to persist through the remainder of 2026, with potential for 'significant disruptions in our supply chain' due to geopolitical events. They also anticipate that 'the price elasticity of demand could remain elevated during 2026' as consumers face inflationary pressures. While the company is focused on productivity initiatives, the near-term outlook appears cautious due to external economic factors and supply chain uncertainties.

The J.M. Smucker Company's fiscal 2026 first quarter earnings call presents a mixed outlook. While the company reaffirmed its full-year EPS guidance, there are shifts in phasing and headwinds from tariffs. Management anticipates that 'the first quarter was going to be our highest coffee cost quarter,' which came in a 'little higher than anticipated'. Tucker Marshall noted that 'the current outlook for pricing in the coffee segment is going to be in the mid-20s now' due to increased tariff rates. This pricing is expected to result in a 'low to mid-teens' volume impact. However, they also see 'favorability coming through our fiscal year as a result of better than anticipated price elasticity of demand assumptions through our coffee portfolio.' Mark Smucker highlighted that Milk Bone is 'returning to growth in the second half of this fiscal year,' driven by strong comps and brand support. SKU rationalization in Sweet Baked Snacks is underway, with $30 million in savings expected, though the impact won't be fully realized until fiscal 2027. Overall, the company is navigating tariff headwinds while banking on pricing actions and portfolio momentum, resulting in a slightly bullish outlook.

SJM's financial performance reveals a concerning trend. Revenue has fluctuated, starting at $1.94B in Q2 2023 and reaching $2.11B in the most recent quarter (Q1 2026), but with significant dips in between. Profitability, as measured by the gross profit ratio, has been inconsistent, with a high of 0.414 in Q4 2024 and a low of 0.225 in Q1 2026. Operating cash flow has been highly variable, with a recent negative value of -$10.6M in Q1 2026, contrasting sharply with the $428.1M generated in Q4 2024. Total debt has increased substantially from $7.94B in Q2 2024 to $8.08B in Q1 2026, indicating increased leverage. Net income has swung from positive $194.9M in Q2 2024 to a negative -$43.9M in the latest quarter. These factors, particularly the negative operating cash flow and inconsistent profitability, suggest potential near-term financial challenges despite revenue fluctuations.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.