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Smucker Sweet Enough for Triple Digits

NEW YORK ( TheStreet) -- Since reporting a 4% revenue decline in its fiscal second-quarter, shares of J.M. Smucker (SJM - Get Report) have remained under pressure. I won't pretend that it was an exceptional quarter. But it certainly wasn't the disaster the Street made it out to be.

At the time, the results in hand from Kellogg (K), Kraft Foods (KRFT) and Nestle (NSRGY) weren't that impressive on a relative basis. But the Street gave these companies standing ovations. Smucker, meanwhile, saw its stock plummet 8%, just when I thought analysts had finally gotten more realistic about growth expectations for the packaged food industry.

All told, I thought Smucker was a bargain then. And with shares down 10% from their October high of $112.92, I like Smucker even more today, especially given management's recent focus on profitability. In that regard, I don't believe the company, which is relatively small when compared to Kraft and General Mills (GIS), has received the respect it deserves for its historically strong margins.

The company reports fiscal third-quarter results Friday. Management will have an opportunity to regain the Street's confidence. Investors want to see that despite the recent weakness in volume, Smucker has a strong portfolio of brands and runs a business that can thrive in any environment.

The Street will be looking for earnings of $1.68 per share on revenue of $1.53 billion, which would represent a 2% year-over-year revenue decline. On the other hand, profits are expected to jump 14% year over year. Given the maturity of this company and its 2.5% dividend yield, I believe the profits should be the true measure of the company's performance.

That's not to say revenue growth doesn't matter. In that regard, no one seems to notice that Smucker has actually posted better-than-expected volume in both the U.S. and internationally.

Analysts should find it even more impressive that the company can maintain such strong profitability amid struggles to move product, especially while rivals that are said to have performed better on revenue aren't able to reward investors with profits. That's where it counts.

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