Analyst Note| Rebecca Scheuneman, CFA |
In its January-ended fiscal third quarter, no-moat Smucker realized 7% organic sales growth and a 19.4% adjusted operating margin, down 70 basis points year over year, driven by higher manufacturing and incentive compensation expenses. Smucker updated fiscal-year 2021 guidance, increasing its organic sales growth expectations to 2% from 0%-1% previously, and earnings per share to $8.70-$8.90, from $8.35-$8.65. As year-to-date results are tracking ahead of our fiscal 2021 expectations for 0.3% organic sales growth and EPS of $8.56, we plan to revise our estimate higher. But we do not expect a material change to our $120 per share fair value estimate, as we are holding the line on our long-term expectations for 2% annual organic sales growth and 18%-19% adjusted operating margins. As shares trade near this level, we suggest investors looking for exposure to the packaged food aisle consider 4-star, narrow-moat Hostess.