This Consumer Stock Just Hit a 2-Year High, Here’s How We’re Playing it
Shares of J.M. Smucker ($SJM) hit a two-year high on Wednesday, climbing 4.34% after the company crushed earnings estimates. The Orrville, Ohio-based maker of Jif peanut butter, Folgers coffee and a variety of well-known packaged goods benefited from increased sales and tariff refunds.
Earnings of $3.24 per share smashed estimates of $2.21, a beat of about 45%. Revenue also beat estimates by about 5%. Smucker went on to raise full-year earnings estimates for 2027, from a range of $9.75 to $10.25 to a range of $10.50 to $11.00.
Setting Up the Trade
Just last month, we opened a trading position in Smucker to go with our long-term core position. We liked Smucker for a short-term trade due to the stock’s breakout from a cup-and-handle pattern (shaded yellow).
After that initial thrust, Smucker returned twice to the breakout point, on August 4 and August 12 (black arrows). Those pullbacks gave traders a second and third opportunity to get long.
Risk Management Notes
Our initial stop was below the stock’s 50-day moving average (blue) at $109.70, as indicated here. We’re going to keep that stop below the 50-day MA, which has now climbed to $116.86.
The new location of our stop is $116.65. We’ll continue to raise the stop in this manner until our target of $140 is reached, or the stop is hit.
Post-earnings momentum has carried this stock halfway to our target, where the sell order for our trade awaits.
Healthy Yield
Despite the stock reaching a two-year high this week, Smucker still has an attractive yield of 3.4%. Smucker has paid out continuous dividends for 56 years, and has raised its dividend for 29 consecutive years.
Lonely at the Top
While the chart provided all the clues we needed for this trade, the charts of other names in this sector aren’t keeping pace with Smucker.
A bellwether for the sector, the State Street Consumer Staples ETF ($XLP), is creeping higher at an almost imperceptible pace. XLP has climbed 11.2% this year, with most of those gains coming in January.
Competitor Kraft Heinz ($KHC) has gained little traction this year, climbing just 1.64% year to date. While Kraft Heinz beat earnings estimates earlier this month, the company’s net sales fell by 1.4% in the most recent quarter.
Bottom Line
While we’re happy to trade Smucker, we have no intention of exiting our core position. The company’s solid record of steady dividend growth, combined with its iconic brands, makes this stock an attractive long-term holding.
At the time of publication, Ponsi was long SJM.
