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The J. M. Smucker Co. (SJM - Analyst Report) is set to report fourth-quarter fiscal 2014 results before the opening bell on Jun 5. Last quarter, this food products manufacturer posted a negative surprise of 0.60%. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

The recent weakness in K-cup sales and price declines mainly in coffee and peanut butter are concerns for Smucker.

Since fiscal 2013, Smucker’s sales have been impacted by a decline in net price realization, mainly in coffee and peanut butter. Though the company has benefited from the decline in commodity costs, primarily owing to lower green coffee costs, lower pricing of its products has more than offset the benefit.

The performance of the K-Cup business has been sluggish since second quarter fiscal 2014. K-Cup sales were flat in the second quarter; below the company’s expectations. Sales of one of the K-Cup brands - Millstone K-Cup - declined in the second quarter, probably due to increased competitive activity in this category. Sales of K-cups further declined 3% in the third quarter, again due to sharp declines in Millstone.

The company continues to expect price declines and weakness in K-cup business to impact results in the soon to be reported quarter. In fact, the company lowered its sales and earnings guidance for fiscal 2014 during the third quarter conference call. The company also anticipates lower volumes, a difficult pricing environment in key categories and currency headwinds to persist in fiscal 2014.

Management expects fiscal 2014 earnings in the range of $5.55 to $5.60 (excluding the special project costs of 20 cents per share), lower than the prior expectation of $5.72 to $5.82 per share. The company has also lowered its sales guidance and now expects fiscal 2014 net sales to go down 5% on a year-over-year basis compared to its previous expectation of a decline of 2%.

The Zacks Consensus Estimate for the fourth quarter and fiscal year 2014 is $1.16 and $5.58 per share, respectively.

Earnings Whispers?

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 ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Expected Surprise Prediction or ESP for Smucker is 0.00% as both the Zacks Consensus Estimate and Most Accurate Estimate stand at $1.16 per share.

Zacks Rank #4 (Sell): 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 momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Estee Lauder Companies Inc. (EL - Analyst Report), with an Earnings ESP of +1.82% and a Zacks Rank #3 (Hold).  

United Natural Foods Inc (UNFI - Analyst Report), with an Earnings ESP of +2.70% and a Zacks Rank #3

Dr Pepper Snapple Group Inc. (DPS - Analyst Report), with an Earnings ESP of +2.20% and a Zacks Rank #3. 

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