U.S. Markets closed

Lots of PBJ’s: How Smucker Stock Tripled Since ‘09

Dee Gill

It is a testament J.M. Smucker’s (SJM) brands that grocery shoppers continued buy its Concord Grape Jelly and Blueberry Syrup throughout the recession, even though those products sat right next to cheaper, often rather indistinguishable, store-branded grape jelly and blueberry syrup. In fact, customers were so loyal to Smucker’s brands that its share price nearly tripled since the 2009 market trough, as seen in a stock chart. And now that penny-pinching is a little less necessary for many consumers, some investors think Smucker shares can do even better.

SJM Chart

Smucker shares are trading at all time highs now, up some 19% this year alone. Company officials say shoppers seem to be a bit less budget conscious now. In addition to jams and syrups, Smucker has done well with coffee in K-Cups, both with its own Folger’s brand and by licensing Dunkin Brands Group (DNKN) coffee for this kind of distribution.

Smucker also has been particularly clever at finding new ways to sell its limited products, like by freezing peanut butter and jelly on white bread and marketing them as Uncrustables. Those are now a staple of elementary school lunch boxes, and the company is launching some 19 new products this year alone. By managing the pricing on these items well – up enough in high-cost times to save profit margins; down to better compete when costs drop – the company creates enviable cash flow. Forecasts call for cash flow to double by 2017.

SJM Free Cash Flow TTM Chart

That translates into money for the occasional acquisition as well as dividend increases and share repurchases. Its dividend yield is now 2%, and significant share repurchases are ongoing.

The majority of industry analysts continue to rate the shares as hold, however, questioning the growth potential of its brands amid massive competition. A Goldman Sachs analyst recently downgraded Smucker’s shares to sell, citing concerns about the company’s coffee sales. Those K-Cup sales have been a key part of revenue and profit growth, but lately the K-Cups Smucker sells have lost market share to competitors like Starbucks (SBUX) and Green Mountain Coffee Roasters (GMCR). But perhaps Smucker can find yet another way to sell grape jelly. That’s worked awfully well before.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.

More From YCharts