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Consumer Stocks' Earnings Slated for Oct 28: NWL, HSY, RCL

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The third-quarter 2016 earnings season or the quarter ended Sep 30, 2016, is well underway. The quarter seems to have had a reasonably good start with comparatively more positive surprises than in the past few quarters. Further, fewer negative estimate revisions for the third quarter makes the investor community optimistic about breaking the negative earnings trend witnessed since first-quarter 2015.

Per the latest Earnings Trends report (as of Oct 26, 2016), 198 S&P 500 members – that collectively account for 48.9% of the index’s total market capitalization – reported earnings results. Total earnings for these index members rose 3.2% while revenues increased 1.9%, with 73.7% beating EPS estimates and 61.1% beating revenue estimates. The percentage of companies that have been able to beat both EPS and revenue estimates is tracking 51.5% at this stage.

This clearly reveals an improvement from the previous quarters and remains on track to produce the best growth in six quarters. Looking at the third quarter as a whole and putting together the actual results of 198 index members with estimates for the upcoming 302 companies, total S&P 500 earnings are expected to be up 1.4% driven by 1.4% higher revenues. Notably, the projected earnings growth rate marks a substantial improvement from the 1% decline anticipated last week.

That said, we quickly jump on to the consumer related sectors namely Consumer Staples and Consumer Discretionary. The Consumer Staples and Consumer Discretionary sectors have respectively seen 34.4% and 31.4% of its S&P 500 members report their third-quarter results. Of this, the Consumer Staples sector has an earnings beat ratio of 81.8% and the Consumer Discretionary sector has a 63.6% earnings beat ratio.

The third-quarter forecasts show that earnings for the Consumer Discretionary sector will inch up 0.2%, whereas revenues will surge 11.7%. On the other hand, the Consumer Staples sector is expected to witness a 4.9% rise in earnings along with a 1.1% improvement in revenues.

Of the earnings yet to be reported, we will here focus on three consumer stocks which are expected to report third-quarter 2016 results on Oct 28.

To start with Newell Brands Inc. (NWL - Free Report) , we are unsure whether this global manufacturer and marketer of consumer and commercial products will be able to post a positive earnings surprise in the quarter to be reported. The company’s past performance reveals that it has outperformed the Zacks Consensus Estimate in 25 out of the past 27 quarters, with an average beat of 4.9% over the trailing four quarters. Newell’s superb earnings history reflects the splendid performance of its brand, constant focus on growth initiatives and solid progress on its Project Renewal program, which have been largely benefiting the company by generating consistent cost savings. Additionally, given its impressive business trends and Jarden’s acquisition, Newell remains confident of achieving its sales and earnings targets for 2016, as is reflected by its outlook.

However, Newell’s significant global presence exposes it to foreign currency headwinds. Thus, the prevalence of these challenges may dent the company’s results. The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. However, our criteria of earnings beat has been let down by an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises. (Read more: Can Newell's Q3 Earnings Maintain its Robust Streak?)

NEWELL BRANDS Price and EPS Surprise

NEWELL BRANDS Price and EPS Surprise | NEWELL BRANDS Quote

Next, the earnings picture for The Hershey Company (HSY - Free Report) – the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery – looks vague. Though the chocolate maker has a positive earnings surprise history with an average beat of 5.3% in the trailing four quarters, the company’s sales trends have been weak since 2014. Weak category trends, increased competition from broader snacking category and soft international growth have been the main culprits for the dismal top line. Moreover, the company lowered its sales and earnings expectations for 2016 twice this year due to weak growth at the CMG category in North America and persistent macroeconomic challenges in China. However, management anticipates sales trends to improve in the second half driven by innovation and larger in-store merchandising and trade support.

The company’s Zacks Rank #4 (Sell) when combined with an Earnings ESP of 0.85%, calls for likely negative beat in the upcoming quarter. Its Most Accurate estimate is $1.17, while the Zacks Consensus Estimate stands higher at $1.18. (Read more: Will Hershey Earnings Disappoint Investors in Q3?)

HERSHEY CO/THE Price and EPS Surprise

HERSHEY CO/THE Price and EPS Surprise | HERSHEY CO/THE Quote

Also in the queue is Royal Caribbean Cruises Ltd. (RCL - Free Report) , a Miami-based cruise company and the owner of popular brands like Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Cruises and CDF Croisières de France. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 23.09%. The company remains positioned to profit from its strong booking trends, technological innovation, capacity growth and various profit-generating initiatives. Further, overall demand for cruising in North America is expected to be solid, and the Caribbean, Alaska and Bermuda itineraries are all poised to have a strong quarter and produce yield improvements.

However, with about 50% of its revenues coming from foreign customers outside the U.S., the prevailing currency headwinds are expected to bear a significant impact on the company’s results. Moreover, uncertainty in economies like Europe and China is likely to limit revenue growth. Further, higher marketing and promotional spend along with increased cruise costs is likely to hurt the quarter’s margins. The company carries a Zacks Rank #4, which when combined with an ESP of 0.00% makes surprise prediction difficult. (Read more: Will Royal Caribbean Q3 Earnings Let Down Investors?)

ROYAL CARIBBEAN Price and EPS Surprise

ROYAL CARIBBEAN Price and EPS Surprise | ROYAL CARIBBEAN Quote

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