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3 Food Companies Likely to Top Estimates This Earnings Season

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Food companies, which are housed within the broader Zacks Consumer Staples sector, have been maintaining their allure on the back of prudent pricing initiatives, savings efforts and innovation. Also, acquisitions and divestitures have enabled many companies to refine their portfolio.

These factors make us somewhat hopeful about Consumer Staples participants’ (ranked among top 32% out of the 16 Zacks sectors) performance this earnings season. The sector collectively gained 15.4% in the year-to-date period compared with the S&P 500 composite’s rise of 19.1%.   

However, we are mindful of some of the headwinds, which might dent performance of food companies. In this context, unfavorable product mix and adverse currency fluctuations are threats. Also, a number of companies in the space are struggling against higher commodity and logistics costs.

Moreover, as these firms operate in a highly competitive arena, they are compelled to invest heavily on promotional activities. Such adversities are likely to exert pressure on margins and affect profitability in the quarter under review.

The broader Consumer Staples sector — which includes the food industry — is anticipated to witness top-line decline of 3.5% this earnings season. The bottom line is expected to deteriorate 5%, per the latest Earnings Outlook.

Despite these headwinds, there are a few food stocks that investors can place their bets on. Using the Zacks methodology, we have identified three such stocks that are poised to beat estimates this time around. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

3 Stocks Set to Beat

Investors can count on General Mills Inc. (GIS - Free Report) , a renowned name in snacks and ready-to-eat food items. The company has delivered an average positive earnings surprise of 11.4% in the trailing four quarters. The Zacks Consensus Estimate for earnings for the to-be reported quarter is pegged at 77 cents. The company has an Earnings ESP of +0.97% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills, Inc. Price, Consensus and EPS Surprise

 

 

You may also consider McCormick & Company, Incorporated (MKC - Free Report) , a popular spices and condiments company. The stock has a Zacks Rank #2 and an Earnings ESP of +0.25%. The Zacks Consensus Estimate for the to-be reported quarter earnings is pegged at $1.30. The company has a long-term earnings growth rate of 8%. It has delivered an average positive earnings surprise of 2.6% in the trailing four quarters.

McCormick & Company, Incorporated Price, Consensus and EPS Surprise

 

 

Medifast, Inc. (MED - Free Report) , which is set to report second-quarter 2019 results on Aug 1, is also a solid bet. The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.71. This manufacturer and distributor of health and nutritional products has an Earnings ESP of +0.59% and a Zacks Rank #3. It has delivered an average positive earnings surprise of 9% in the trailing four quarters.

MEDIFAST INC Price, Consensus and EPS Surprise

 

 

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