The J. M. Smucker Co.
) is set to report first quarter fiscal 2013 results on Aug 21,
before the market opens. Last quarter, it posted a 12.7% positive
surprise. Let's see how things are shaping up for this
Factors to Consider this Quarter
Smucker has been delivering solid results for the past few
quarters, owing to its regular product innovations, strategic
acquisitions, improving volumes, frequent dividend increases and
share buybacks. Moreover, its key partnerships with
Dunkin Brands Group, Inc.
(DNKN) (to produce Dunkin' Donuts packaged coffee brand) and
Green Mountain Coffee Roasters, Inc
(GMCR) (to produce coffee brands for its popular K-Cups used in
Keurig brewers) provide significant growth opportunities.
Despite the positives, we should not ignore the fact that
lower green coffee costs have resulted in a decline in net price
realization of Smucker's products, which has dented the company's
sales in the last quarter. Still, we believe that improved
volumes will offset the price declines in the upcoming
Moreover, Smucker's decision to market and distribute
Cumberland's sweeteners to foodservice customers in the U.S. and
Canada, as per its distribution deal with Cumberland Packing
Corp. last quarter, will prove beneficial in the upcoming
Our proven model does not conclusively show that Smucker is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive earnings expected surprise
prediction (ESP) (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 or #3 for this to happen. That is not
the case here as shown below.
Negative Zacks ESP:
The Most Accurate estimate stands at $1.14 while the Zacks
Consensus Estimate is higher at $1.20. That is a difference of
Zacks Rank #3 (Hold):
Smucker's Zacks Rank #3 (Hold) lowers the predictive power of ESP
because the Zacks Rank #3 when combined with a negative ESP makes
surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell
rated stocks) going into the earnings announcement, especially
when the company is seeing negative estimate revisions
Other Stocks to Consider
Here are some other companies in the consumer staples sector
that can be considered as our model shows that they have the
right combination of elements to post an earnings beat this
Pilgrim's Pride Corp.
), Earnings ESP of +35.09% and a Zacks Rank #1 (Strong Buy).
Boston Beer Inc.
), Earnings ESP of +6.11% and a Zacks Rank #1.
Tyson Foods Inc.
), Earnings ESP of +2.90% and a Zacks Rank #2 (Buy).
PILGRIMS PRIDE (PPC): Free Stock Analysis
BOSTON BEER INC (SAM): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis
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