"We’re downgrading J.M. Smucker (SJM) to Underperform from Market Perform. We maintain that SJM is among those most at risk within a challenging consumer environment and note that: i) coffee growth is slowing sharply within single-serve and ii) cost deflation benefits are poised to moderate while recent benefits are weakened by lower prices at retail."
Firm says long-term risk to coffee business is not yet reflected in valuation, despite reduced 2014 guidance. New single-serve entrants TreeHouse and Kraft (KRFT - Maxwell House and Gevalia) are already impacting sales, and a 2015 full-scale rollout of McCafe (MCD) could put some of SJM's Dunkin' Donuts business at risk.
Wells values shares at $92-94, vs. a current $104.75.