J.M. Smucker cut at BofA in reaction to Hostess Brands acquisition By Investing.com

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J.M. Smucker cut at BofA in reaction to Hostess Brands acquisition

Published Sep 15, 2023 02:49

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J.M. Smucker cut at BofA in reaction to Hostess Brands acquisition

SJM

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BofA cut J.M. Smucker (NYSE:SJM) to Neutral from Buy, lowering the price target to $145 from $170, in a note Thursday.

BofA analysts told investors that the proposed $5.6 billion acquisition of Hostess Brands (NASDAQ:TWNK) is the driver for the thesis change.

"Our prior Buy rating was based on the view that SJM would focus on a more optimized portfolio of core brands, following several years of divestitures of low growth/margin assets. In our view, TWNK would add complexity to SJM’s story and introduces execution risk for a company with mixed M&A history," they said.

The analysts noted that SJM's history with acquisitions has been mixed, although they believe the underlying SJM business remains attractive on volume growth.

BofA said the risks of the deal include the contribution from pricing waning, elasticities remaining negative, and TWNK "lapping temporary share gains from 2022 when competitor Little Debbie experienced supply disruptions."

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