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Food Stocks Slated for Earnings on Feb 7: ADM, MDLZ & ARMK

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Delving deeper into the fourth-quarter 2016 earnings season, we note that the ongoing scenario does not only seem to be on track to attain its best performance in eight quarters, but is also set to make a new earnings record for the quarter. Further, we remain hopeful of earnings growth (on a year-over-year basis) for the second consecutive quarter after five straight quarters of earnings decline.

Per the Earnings Preview as of Feb 3, 2017, earnings for the total S&P 500 companies will improve 6.8% from the year-ago period, with total revenue rising by 3.9%.

As per the report, out of the 275 S&P 500 companies that have come up with their quarterly numbers, approximately 68% posted positive earnings surprises, while 54.5% beat the top-line expectations. Total earnings for these index members were up 6.9% from the year-ago quarter, while revenues increased 4.2%.

The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, four are expected to witness an earnings decline. Of these, Autos, Transportation and Conglomerates are likely to be a major drag. Total earnings for the Consumer Staples sector are estimated to rise 9.7%, whereas revenues are projected to improve 4.1%.

So, let’s see what awaits the following food stocks within the Consumer Staples sector that are queued up for earnings releases on Feb 7.

Archer-Daniels-Midland Company (ADM - Free Report) , a leading food processing company is slated to report fourth-quarter 2016 results. The company has delivered a positive earnings surprise of 25.5% in the third quarter, breaking its negative surprise trend.

Our proven model does not conclusively show that Archer Daniels is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Archer Daniels has an Earnings ESP of -3.75%. This is because the Most Accurate estimate of 77 cents stands below the Zacks Consensus Estimate of 80 cents.  However, the company’s Zacks Rank #3 increases the predictive power of ESP, but we need to have a positive ESP to be confident about an earnings surprise.

Archer Daniels has been benefitting from its cost-saving initiatives and increase in processing capabilities as well as global footprint through strategic acquisitions. Further, citing improved market conditions and higher U.S. harvest, along with solid execution capabilities, the company remains confident of delivering solid results for fourth-quarter 2016 and 2017. However, Archer Daniels’ sales were soft in the last quarter mainly due to weakness in the Corn Processing and Oilseeds Processing segments. Also, the company's global market presence keeps it exposed to the risk of adverse currency movements. (Read more: Archer Daniels to Post Q4 Earnings: What's in Store?)

Another food stock Mondelez International, Inc. (MDLZ - Free Report) , which is slated to report fourth-quarter 2016, has outperformed the Zacks Consensus Estimate by an average of 11.2% in the trailing four quarters.

Mondelez International, Inc. Price, Consensus and EPS Surprise

Mondelez International, Inc. Price, Consensus and EPS Surprise | Mondelez International, Inc. Quote

Mondelez has an Earnings ESP of -2.04%, as the Most Accurate estimate stands at 48 cents while the Zacks Consensus Estimate is pegged at 49 cents. However, the company carries a Zacks Rank #3.

Though a favorable Zacks Rank increases the predictive power, we need to have a positive ESP to be confident about an earnings surprise.

After solid earnings growth in third-quarter 2016, Mondelez expects 2016 adjusted earnings per share to rise 25% on a constant currency basis. That said, currency headwinds are likely to drag down the company’s 2016 adjusted earnings per share by 9 cents. We noted that approximately 80% of the company’s revenues come from outside the U.S.   

However, Mondelez has been trying to improve its bottom line through cost-control and productivity initiatives, in order to mitigate the impact of weak sales. In the fourth quarter, Mondelez will likely witness positive vol/mix, while flat to slightly positive vol/mix for the full year. (Read more: Mondelez Q4 Earnings: Disappointment in the Cards?)

Finally, let’s see what’s in store for Aramark (ARMK - Free Report) , which posted a positive earnings average surprise of 2.2% in the trailing four quarters.

Aramark Price, Consensus and EPS Surprise

Aramark Price, Consensus and EPS Surprise | Aramark Quote

Our proven model does not conclusively show that Aramark is likely to beat earnings estimates in first-quarter fiscal 2017. It has an Earnings ESP of 0.00%, with both the Most Accurate estimate and the Zacks Consensus Estimate pegged at 48 cents. However, the company carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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Archer Daniels Midland Company (ADM) - free report >>

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