The J.M. Smucker Company (SJM) reported results for the third quarter of 2010 with earnings of $1.17 per share. Earnings were well above the Zacks Consensus Estimate of 90 cents per share and were up 34.5% year-over-year.

Profits were primarily driven by a successful Fall Bake and Holiday period with volumes and sales gains across most of the company’s brands.

Net sales for the quarter increased 2% year-over-year, primarily driven by Folgers coffee sales. Excluding Folgers sales, net sales were down 2% as 4% increase in volumes was fully offset by a 6% decline in price and mix.

Segment wise, net sales in the U.S. Retail Coffee Market grew 9% year-over-year. Volume increased by approximately 4%. The Folgers brand contributed the majority of the volume increase, while the continued growth of Dunkin’ Donuts coffee in the gourmet category also contributed to the top line.

The U.S. Retail Consumer Market posted net sales growth of 1%, while volume increased 4% percent, driven by gains in Hungry Jack pancake mixes and syrups, Jif peanut butter and Smucker’s fruit spreads. Volume gains were partially offset by increases in promotional spending, sales mix and price declines on certain items.

Net sales in the U.S. Retail Oils and Baking Market declined 12%, reflecting the impact of price declines taken last year and increased promotional spending across the segment. Nevertheless, volumes were up 3% driven by gains in the Pillsbury and Crisco brands.

Net sales in the special markets segment increased 8%, due to a favorable exchange rate and an additional five days of Folgers sales. Volume increased 6% in the third quarter driven by gains in Canada’s baking and spreads categories, coffee in the foodservice and export businesses and the natural foods business. These were offset by declines in foodservice, mix and increases in promotional spending.

Gross margin for the quarter expanded 409 basis points (bps) to 38.0% versus 34.0% in the prior-year quarter. The increase was primarily attributable to Folgers. Moreover, the impact of lower green coffee raw material costs, freight costs and the extra five days of business also had a favorable impact on the gross margin.

The operating margin for the quarter expanded 593 bps to 17.4% from 11.5% in the comparable prior-year quarter.

Year-to-date, cash provided by operations was $508.7 million compared to $289.0 million in the prior-year period. The company has a debt-to-capitalization ratio of 14.7%.

Concurrent with the earnings release, management raised its guidance for fiscal 2010. Net sales growth is expected in the range of $4.5 billion to $4.6 billion. Annual earnings are now expected to be in the range of $4.02 to $4.07, compared to earlier guidance of $3.95 to $4.05 per share.

The company remains committed to its long-term strategic objectives of 6% annual sales growth and greater than 8% earnings growth, excluding charges.

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