The J. M. Smucker Co. (SJM - Analyst Report) is set to report second-quarter fiscal 2015 results before the opening bell on Nov 19. Last quarter, this food products manufacturer posted a negative surprise of 2.19%. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

The recent hike in green coffee costs is expected to impact volumes and thus the sales of the company’s coffee segment in the second quarter.

On Nov 12, the company announced preliminary results for the quarter. Smucker stated that adjusted earnings will be flat at $1.53 per share in the second quarter, while net sales will decline 5% from the year ago-quarter, significantly impacted by volume declines in the U.S. Retail Coffee segment.

The Retail Coffee segment is expected to report 10% decline in net sales in the second quarter due to an 18% decline in volumes. The volume decline is expected to come from a 20% decline in volume in its Folgers coffee brand as customers recoiled strongly due to rising prices. In Jun 2014, the company had increased its packaged coffee prices of Folgers and Dunkin' Donuts branded coffee products by an average 9% in response to the continuous hike in green coffee costs. (Read: Smucker Raises Coffee Price).

Segment profit is also anticipated to decrease 16% on a year-over-year basis for the U.S. Retail Coffee segment during the second quarter due to higher coffee prices.

Though the company is positive that volume trends will improve in the second half of fiscal 2015, it continues to expect negative impact from higher green coffee costs.

Due to soft volume trend in the second quarter, the company had to cut down its fiscal 2015 forecast on Nov 12. For fiscal 2015, the company now expects net sales to decline approximately 1% from fiscal 2014 compared with the prior sales growth guidance of 3%-4%.

Smucker also lowered its earnings guidance for fiscal 2015 and now expects it in the range of $5.45 to $5.65 per share, compared with the prior guidance range of $5.95 to $6.05.

Estimates declined sharply for the second quarter and fiscal 2015, after the announcement of the preliminary results.

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: ESP for Smucker is 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate stand at $1.53 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/retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Best Buy Inc (BBY - Analyst Report), with an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).

The Kroger Co. (KR - Analyst Report), with an Earnings ESP of +3.28% and a Zacks Rank #2 (Buy).  

Foot Locker Inc. (FL - Snapshot Report), with an Earnings ESP of +1.28% and a Zacks Rank #3 (Hold).