NEW YORK ( TheStreet) -- With earnings results in hand from the likes of Kellogg ( K), Kraft Foods ( KRFT) and Nestle ( NSRGY), I had begun to think that analysts had finally developed more realistic expectations about the packaged food industry, given the applause these companies have received for results that were (at best) decent where compared to historical norms. But that sentiment didn't last.
In disappointing fashion, the Street's irrationality resumed following J.M. Smucker (SJM) 8% stock decline, which I can describe only as an overreaction to the company's fiscal second-quarter results. Although the stock has since recovered some of those losses, I believe the fact that shares are still off 7% from their October high of $112.92 presents an opportunity for investors looking for sweet gains.
Plus, given management's focus on profitability and running a business with several market-leading brands, on a long-term basis, Smucker stock, which is cheap when compared to ConAgra (CAG) and Mondelez (MDLZ), is poised to outperform in 2014. And to say nothing about the noticeable volume/price recovery the entire packaged food industry has already begun to enjoy.
Now to be completely honest, I've been regrettably indifferent about this company for most of the year. This is even though Smucker, which runs a relatively small business compared to Kraft and General Mills (GIS), has outperformed its larger rivals in several metrics, including gross margin and operating margin.
My issue, though, has been that the stock was already very popular. It wasn't going to sneak up on anyone. Accordingly, the Street has had no problem rewarding Smucker for its above-average performances. And given that the sector as a whole was struggling to move product, while profiting very little on what it was able to move, I felt Smucker's popularity was well deserved.