Michael Fowlkes' Analyst Insights
Options and ETF Analyst Writer
J.M. Smucker reports Q2 numbers November 28
11/24/2018 12:53 PM
J.M. Smucker (SJM) reports its fiscal second-quarter results November 28. The company will report its numbers before the market open with the consensus calling for earnings of $2.35 per share. During the same period last year the company earned $2.02.
SJM was recently trading at $109.99 down $23.39 from its 12-month high and $13.86 above its 12-month low. InvestorsObserver’s Stock Score Report gives SJM a 81 long-term technical score and a 78 short-term technical score. The stock has recent support above $105 and recent resistance below $115. Of the 11 analysts who cover the stock 1 rate it Strong Buy, 0 rate it Buy, 9 rate it Hold, 0 rate it Sell, and 1 rate it Strong Sell, SJM gets a score of 60 from InvestorsObserver’s Stock Score Report.
SJM has missed estimates on the top and bottom line in each of its last two quarterly reports. The street does expect to see that streak end this quarter with a whisper number of $2.37 suggesting a two cents earnings beat. SJM has traded in a fairly tight sideways trend over the last six months, but remains in the lower end of its 52-week range as investors remain cautious given the recent misses. Earnings growth has slowed considerably. After rising 10% per annum over the last five years analysts expects profits to rise just 4% this year, and by a modest 1% next year. Looking at a longer horizon, profits are forecast to rise at an annual rate of 10.5% over the next five years, but traders will likely remain bearish until the company is able to start showing stronger growth numbers. SJM has a very low valuation, with a forward P/E of just 12.5, so the stock probably has little downside risk barring a huge earnings miss. From a valuation perspective the stock looks OK, but shareholders will need to be patient to see any meaningful rise in their investments. Analysts have a $110.30 average price target on the stock.
Stock Only Trade
If you're looking to establish a long stock position in SJM consider buying the stock under $110. Sell if it falls below $101 or take profits if it gets to $127.
If you want a bullish hedged trade on the stock, consider a 1/18/19 90/95 bull-put credit spread for a $0.30 credit. That's a potential 6.4% return (41.6% annualized*) and the stock would have to fall 13.9% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an 1/18/19 125/130 bear-call credit spread for a $0.35 credit. That's a potential 7.5% return (49% annualized*) and the stock would have to rise 13.9% to cause a problem.
Covered Call Trade
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 1/18/19 $110 covered call. Buy SJM shares (typically 100 shares, scale as appropriate), while selling the 1/18/19 $110 call for a debit of $104.89, per share. The trade has a target assigned return of 4.9%, and a target annualized return of 32% (for comparison purposes only).
Articles and other Content