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Hoard Peanut Butter as Prices Soar: 4 Stocks to Benefit

NEW YORK ( TheStreet) -- Peanut butter lovers will soon face the brunt of soaring prices as scorching heat and a drought in southern U.S. have ravaged the crop, resulting in zero yield in key producing states this year. On average, Americans spend almost $800 million a year on peanut butter products every year. The average American consumes more than six pounds of peanuts and peanut butter products each year, according to the National Peanut Board.

Prices for a ton of runner peanuts, used to make peanut butter, touched $1,200 mid-October, compared to $450 per ton in the same month a year ago, according to the U.S. Department of Agriculture. Peanut production stood at 3.63 billion pounds in 2011, down 13% from last year's 4.16 billion pounds, the Department of Agriculture reveals.

These four stocks have potential upsides up to 12% with average buy and hold rating of 42% and 55%, respectively, according to data compiled by Bloomberg.

These stocks are arranged in ascending order of upside potential, based on analysts' average estimates.

4. The J.M. Smucker Company (SJM - Get Report) manufactures and markets branded food products worldwide, with principal products being coffee, peanut butter, shortening and oils, fruit spreads, canned milk and baking mixes. The company generates a significant portion of its sales in the U.S. SJM will release its second-quarter fiscal 2012 results on November 17.

J.M. Smucker, maker of the popular Jif peanut butter, will hike prices almost 30% starting November 8, as this year's peanut harvests have been the worst in decades.

Recently, SJM declared a dividend of 48 cents per share on its common stock payable December 1 to shareholders of record November 11. The company has a dividend yield of 2.3%, currently.

In the last week of October, SJM announced signing a definitive agreement to acquire a majority of the North American foodservice coffee and hot beverage business of Sara Lee for $350 million, to be paid when the deal closes in early 2012. Also, the company will pay an additional $50 million in declining installments over the next 10 years.

For the second quarter of fiscal 2012, a consensus forecast of analysts polled by Bloomberg sees net income of $158.29 million, or $1.40 per share, a sequential 23.9% increase. This compares to $165.28 million, or $1.38 per share, in the second quarter of fiscal 2011. Cash flow per share for the second quarter of fiscal 2012 is forecast to rise to $1.49, compared to 39 cents in the second quarter of fiscal 2011. Year-over-year sales grew 17% to $1.5 billion.

Of the 16 analysts covering the stock, 31% recommend a buy and 63% rate it a hold. Data from Bloomberg has analysts forecasting the stock gaining 4.3% to $80.56 in the upcoming 12 months.

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