By Mihir Dalal

Orrville, Ohio-based Smucker also backed its full-year sales outlook of $4.65 billion. In June, the company had forecast fiscal year 2010 adjusted earnings of $3.65 to $3.80 per share.

"Smucker has terrific brands which are aided by consumers eating more at home. There's nothing more basic than peanut butter and jelly sandwiches," Janney Montgomery Scott analyst Mitchell Pinheiro told Reuters.

The company's gross margins rose in the first quarter, mainly due to strong sales volumes and a favorable product mix at Folgers.

Folgers is the largest producer of retail packaged coffee in the United States. Its product offerings include Folgers and Millstone brands and a license to manufacture and distribute Dunkin' Donuts coffee in the retail grocery market.

Smucker, which acquired Folgers in November last, said it saw efficiencies from integration of Folgers as its marketing and administrative expenses fell as a percentage of sales from the year-ago period.

The company also recorded higher volumes in several categories including Smucker's fruit spreads and Uncrustables sandwiches, Pillsbury baking mixes and frostings, and Hungry Jack potatoes and pancakes during the quarter.

However, volume gains were more than offset by price declines taken earlier this year, primarily at its U.S. retail oils and baking segment, and higher promotional spending in some categories, the company said.

Smucker had cut oil, shortening and flour prices by about 13 percent in January and lowered canned milk prices by 7 percent in June due to a drop in commodity costs, a company executive said on a conference call with analysts.

STRONG Q2 RESULTS

The company posted a first-quarter net income of $98.1 million, or 83 cents a share, compared with $42.3 million, or 77 cents a share, a year ago.

Excluding items, the company earned 92 cents a share, beating analysts' average estimate of 80 cents a share, according to Reuters Estimates.

For the first quarter ended July 31, revenue rose 58 percent to $1.05 billion.

Smucker's shares, which have risen 29 percent since June, were up $2.10 at $53.98 in late morning trade Friday on the New York Stock Exchange. They touched $55.33 in early trade.

"The stock trades at a discount to the S&P Packaged Food Index despite a growth rate that is more than double the average. But investors are starting to recognize the value and have increased confidence in its guidance," analyst Pinheiro said.

Also, investors are more comfortable with Smucker's ability to integrate Folgers on time, and more certain about the benefits from the acquisition, he said.

(Editing by Jarshad Kakkrakandy and Gopakumar Warrier)