Back to top

Image: Bigstock

Food Stocks' Earnings Lined Up for Feb 1: HSY, INGR, POST

Read MoreHide Full Article

The food industry has been dealing with a slew of issues of late. Major U.S. food companies are striving to retain market share as easy-to-prepare and ready-to-eat food items are losing ground. A shift in consumer preference toward healthier options and a higher level of price consciousness are hurting the industry, making it hard for legacy brands to boost sales.

In order to combat weak sales, food majors are aggressively trying to improve their products through innovation as well as by pursuing strategic acquisitions and divestitures. They are channeling funds toward product and packaging innovation as well as reformulating a number of existing products to meet the rapidly changing consumer view on health and wellness. Apart from this, companies have adopted multi-year restructuring initiatives with focus on improving operational efficiency to generate cost savings.

Therefore, though the companies’ sales have been relatively soft, cost savings have led to better margins. Again, savings are being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth.

Among the food companies that have already reported their numbers, McCormick & Company (MKC - Free Report) posted solid fourth-quarter fiscal 2017 results, with earnings and revenues outpacing the Zacks Consensus Estimate and improving year over year. Last month, General Mills (GIS - Free Report) delivered in-line earnings in second-quarter fiscal 2018, after a negative earnings surprise of 7.79% in first-quarter fiscal 2018.

Q4 Expectations

As we take a closer look at the Q4 earnings season, we see a steady improvement over the past few quarters. According to the latest Earnings Preview, of the 133 S&P 500 members that have reported Q4 results as of Jan 26, 81.2% have surpassed EPS estimates and 78.9% have come up with top-line beats. The proportion of companies beating both EPS and revenue estimates is 65.4%.

Total Q4 earnings are expected to be up 11.6% from the same period last year on 7.5% higher revenues compared with 6.7% earnings growth in the third quarter of 2017 on 5.9% rise in revenues.

For Q4, total earnings for the companies in the Consumers Staples sector (which includes food stocks) are projected to grow 6% year over year, more than 3.9% in the previous quarter. Revenues are expected to increase 2.5% compared with 1.9% in the third quarter.
 
Let’s see what awaits the following food stocks that are queued up for earnings releases on Feb 1.

Our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock has a positive Earnings ESP, the chance of beating earnings estimates is high.

The Hershey Company (HSY - Free Report) is slated to report fourth-quarter 2017 results, before the opening bell.

We expect the top line to remain subdued in the to-be-reported quarter, as has been the case for quite some time now owing to changes in consumer preference in North America and soft international sales.

In the fourth quarter, the company had plans of introducing retail-ready packaging at select outlets. Also, Hershey is transitioning the packaging of its core chocolate products. Though these initiatives will improve shelf presence and visibility over the long haul, it is expected to affect fourth-quarter gross margin. Moreover, higher advertising expenses in China and the United States related to product innovation are expected to impact results in the to-be-reported quarter.

Overall, for the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $1.06, reflecting a 9.4% year-over-year decline. The consensus estimate for revenues is pegged at $1.98 billion, implying a 0.3% increase.

Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 3.9%. The company beat the consensus mark in all of the last four quarters, resulting in an average earnings beat of 9%. Our proven model conclusively hints at an earnings beat for the company this quarter, as Hershey has an Earnings ESP of +0.87% and Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

(read more: Will Weak Sales Hurt Hershey This Earnings Season?)
 

Hershey Company (The) Price and EPS Surprise

 

Ingredion Incorporated (INGR - Free Report) , a leading global provider of ingredient solutions to diversified industries, posted a positive earnings surprise of 8.33%. The company surpassed estimates in all of the past four quarters and has an average positive surprise of 4.0%.

The company’s business model and strategic blueprint are encouraging. Continuous improvement initiatives and lower input costs continue to drive operational efficiencies throughout North America. However, moderate margin compression is expected as the company has been getting rid of its high fructose corn syrup business to make room for new specialty sweetener blends. With growth in specialty sweetener blends, the company anticipates higher operational efficiency and price/mix.

Our proven model does not conclusively show that Ingredion is likely to beat earnings this quarter as it has an Earnings ESP of 0.00% (Most Accurate estimate and Zacks Consensus Estimate stand at $1.74) and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $1.74, up 4.2% year over year. Meanwhile, the consensus estimate for revenues is at $1.44 billion, reflecting a 2.8% increase.

Ingredion Incorporated Price and EPS Surprise

 

Post Holdings (POST - Free Report) , a consumer packaged goods holding company, is scheduled to report first-quarter fiscal 2018 results. The company posted a negative earnings surprise of 5.4%. The company missed estimates in three of the past four quarters and has an average positive surprise of 0.5%.

Our proven model conclusively shows a beat for Post Holdings this earnings season. The company has an Earnings ESP of +2.44% and a Zacks Rank #3.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 82 cents, up 32.3% year over year. Meanwhile, the consensus estimate for revenues is at $1.42 billion, reflecting a 13.6% increase.

Post Holdings, Inc. Price and EPS Surprise

 

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Published in