J.M. Smucker Co , known for its peanut-butter and jelly, posted a quarterly profit that easily topped market expectations, helped by strong results at its Folgers business, and expected its full-year profit at the higher end of its outlook, sending its shares up 3 percent.

In June, Orrville, Ohio-based Smucker had forecast fiscal year 2010 adjusted earnings of $3.65 to $3.80 a share.

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 brand, Millstone brand 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.

Several categories including Smucker's fruit spreads and Uncrustables sandwiches, Pillsbury baking mixes and frostings, and Hungry Jack potatoes and pancakes recorded higher volumes 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 prices on food items such as flour and Crisco oil and shortening, due to a drop in commodity costs.

Smucker 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 were trading up $1.87 at $53.75 before the bell. They closed at $51.88 Thursday on the New York Stock Exchange.

(Reporting by Mihir Dalal in Bangalore; Editing by Jarshad Kakkrakandy and Gopakumar Warrier)