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The J. M. Smucker Co. (SJM - Analyst Report) is set to report second quarter fiscal 2014 results on Nov 20, before the market opens. Last quarter, it posted a 3.3% positive surprise. Lets see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Smucker is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.63%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #2 (Buy):Smucker carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. 

The combination of Smucker’s Zacks Rank #2 (Buy) and a positive ESP of +0.63% makes us confident of an earnings beat on Nov 20.

What is Driving the Better-than-Expected Earnings?

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. (to produce Dunkin' Donuts packaged coffee brand) and Green Mountain Coffee Roasters, Inc (to produce coffee brands for its popular K-Cups used in Keurig brewers) provide significant growth opportunities. We believe these will benefit second quarter results as well.

In Aug 2013, the company acquired Enray Inc and its flagship brand truRoots to significantly increase its presence in the natural foods business, which might contribute to company’s sales.

Despite these positives, we should not ignore the fact that lower green coffee costs have resulted in a decline in net price realization, denting the company’s sales in the last two quarters. However, we believe that improved volumes will offset the price declines in the upcoming quarter.

Other Stocks to Consider

Other stocks worth considering in the consumer staples sector are:

Omega Protein Corp. with Earnings ESP of +16.00% and a Zacks Rank #1 (Strong Buy)

Sysco Corp. (SYY - Analyst Report) with Earnings ESP of +2.50% and a Zacks Rank #3 (Hold)

Boston Beer Inc. (SAM - Analyst Report) with Earnings ESP of +2.63% and a Zacks Rank #3 (Hold).

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