By Dave Marino-Nachison (TMF Braden)
April 14, 2000

When do Foolish news writers bemoan our general rule of not writing about over-the-counter (OTC) stocks? On days like today, when we might have had the opportunity to write about the earnings report of Lincoln Snacks, the proud maker of Fiddle Faddle and something I've never heard of called Screaming Yellow Zonkers (a butter-glazed popcorn snack Bill Barker says is fantastic).

But we can't. Instead, then, we'll turn to the news out of Pennsauken, N.J.-based J & J Snack Foods (Nasdaq: JJSF). Shares of J & J -- not to be confused with Drip Port holding Johnson & Johnson (NYSE: JNJ) -- dropped a few points this morning after the company told investors to expect disappointing fiscal second-quarter financial results when earnings are reported April 20. The company expects EPS of $0.08, down from last year's $0.12 and missing First Call's four-analyst consensus estimate of $0.14.

Sales for the quarter are seen at about $68 million, the company expecting 8% year-over-year growth over last year's quarter. That's better than the 7% posted in 1999, but the company was clearly expecting -- and guiding analysts toward -- more. J & J didn't go into much detail about the earnings shortfall in its press release.

And so the company's stock fell today despite the company's assurance that fiscal 2001 will be the best ever. "We are optimistic that we will post significant sales gains for the current year and achieve or beat estimates," said CEO and Chairman Gerald Shreiber. Wall Street is currently looking for about 12% earnings growth on the year; last year J & J did 19%, so that's not exactly something to scream about.

Why do shares fall on bad short-term news even when a company reports good long-term news? That's simple enough: It's a heck of a lot easier to guess at the future when it's six days away than when it's six months off.

But some small-cap investors have nevertheless been poking around J & J lately, and there may be good reason for food-savvy Fools to do the same. Why? J & J will already be familiar to some investors because of its ownership of the Superpretzel soft pretzel snack line, and the ICEE products found at thousands of malls, arenas, and Burger Kings nationwide. The next growth opportunity, though, may lie in your grocer's freezer aisle.

In November, J & J signed on with Coca-Cola's (NYSE: KO) Minute Maid Co. to market frozen juice products under the Minute Maid and Hi-C brand names. Hi-C was first to hit the stores with a national rollout last month, contributing calcium-supplemented fruit bars to the rainbow of cool treats currently available.

Those two brands and the ICEE business are off to a swift start in 2000, and the hot summer months are on the way. Will that translate into shareholder value and market value gains for investors disappointed that their company's shares lost track of the S&P 500 Index in early 1999? With the shares trading at about 10x forward earnings and approaching a 52-week low, investors might do well to investigate J & J.

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