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Will Coffee Business Aid J.M. Smucker's (SJM) Q2 Earnings?

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The J. M. Smucker Company (SJM - Free Report) is set to report second-quarter fiscal 2017 results before the opening bell on Nov 17.

Last quarter, this food products manufacturer delivered a positive surprise of 6.29%. We note that the company posted positive earnings surprises in all the last four quarters, translating to an average positive surprise of 19.45%.

Let’s see how things are shaping up prior to this announcement.

SMUCKER JM Price, Consensus and EPS Surprise

 

SMUCKER JM Price, Consensus and EPS Surprise | SMUCKER JM Quote

Factors at Play

Strong organic sales growth, product innovation and constant efforts to expand through acquisitions are the company’s strong points. Further, lower coffee prices owing to the continued decline in green coffee costs are aiding the company’s volumes. Lower pricing on Folgers roast and ground coffee has resulted in improved performance for the mainstream coffee business in fiscal 2016. In fact, management expects momentum in the coffee business to continue in the second quarter of fiscal 2017.

The company completed the acquisition of pet food maker, Big Heart Pet Brand in Mar 2015. This placed Smucker in the fastest growing pet food and snacks category in the U.S. Also, the divestiture of its U.S. canned milk brands and operations (in Dec 2015) to Eagle Family Foods Group has allowed the company to focus on its key brands and growth opportunities.

The acquisition of Big Heart Pet Brand, the launch of Dunkin Donuts K-cup pods and expanding distribution of the Natural Balance pet brand are expected to contribute to the top line in fiscal 2017.

However, currency headwinds pose a concern for Smucker. Management also remains apprehensive about heightened competitive activity in the pet food business.

Earnings Whispers

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

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.87%. This is a meaningful and leading indicator of a likely positive earnings surprise.Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Smucker carries a Zacks Rank #3 (Hold), which when combined with +2.87% ESP makes us confident of an earnings beat.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Stocks in the consumer staples sector carrying both a positive Earnings ESP and a favorable Zacks Rank, and therefore worth considering include:

Avon Products, Inc. , with an Earnings ESP of +10.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sanderson Farms, Inc. , with an Earnings ESP of +4.48% and a Zacks Rank #1.

Sysco Corp. (SYY - Free Report) , with an Earnings ESP of +1.89% and a Zacks Rank #2.

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