The second-quarter earnings season is well past the halfway mark and despite macroeconomic issues and continued volatility in the equity markets, a number of companies have come out with positive surprises, in terms of both earnings and revenues. However, the quarter is on track to be the fifth in a row to record an earnings decline for the S&P 500 index.
As per our Earnings Preview report, out of the 317 S&P 500 members that have reported financial results so far, 72.9% beat on earnings while 53.6% surpassed revenue estimates. However, total earnings were down 3.3% year over year while revenues declined 0.9%.
Beverage stocks have had a good Q2 with leading food/beverage giant PepsiCo, Inc. (PEP - Free Report) once again reporting stellar results in July, thereby bringing the sector to the limelight. Pepsi also raised its full year earnings growth target based on its strong performance in the first half and a favorable outlook. Another soft drink behemoth Dr. Pepper Snapple Group, Inc. reported strong second-quarter 2016 results on Jul 27 and increased its 2016 guidance. It surpassed the Zacks Consensus Estimate for both earnings and sales for the fourth quarter in a row. Purified water provider Primo Water Corp. (PRMW - Free Report) also reported better-than-expected Q2 results.
Higher sales of the so-called “healthy” non-carbonated drinks, improved performance in the North America segment, pricing gains, lower costs of key raw materials, cost reductions along with productivity gains and overall better execution have aided these soft drink companies to deliver impressive results in the past few quarters.
However, beverage giants like The Coca-Cola Company (KO - Free Report) and Molson Coors Brewing Co. (TAP - Free Report) reported soft second-quarter 2016 results. Though Coca-Cola beat the Zacks Consensus Estimate for earnings, it missed the same for sales due to severe macroeconomic challenges in many international markets. Importantly, soda volumes declined in the all-important North America segment. Further, Coca-Cola lowered its previously issued sales guidance for 2016 and guided for an adjusted earnings decline in the year.
Molson Coors missed on earnings but beat revenue estimates. Lower worldwide volumes, higher brand spending and currency headwinds were partially offset by positive mix, lower underlying net interest expense and higher underlying U.S. equity income.
On Aug 4, three other soft drinks companies, Coca-Cola Enterprises Inc. , Cott Corporation (COT - Free Report) and Monster Beverage Corporation (MNST - Free Report) are set to report their quarterly results. Will these soft drink makers beat on earnings this season? Let’s have a look at what’s in store for them.
Coca-Cola Enterprises, the Western European bottler of The Coca-Cola Company, has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for second quarter earnings is pegged at 74 cents per share. Additionally, the company has delivered an average positive earnings surprise of 3.52% in the trailing four quarters.
Despite weak sales and volumes, certain positives like commodity cost favorability, cost cutting and share repurchases are driving the company’s operating profit and EPS growth. We expect the trend to continue in the to-be-reported quarter.
Cott Corporation, one of the world's largest non-alcoholic beverage companies, is slated to release second-quarter 2016 results before the opening bell. It has an Earnings ESP of -37.50% and a Zacks Rank #3. The Zacks Consensus Estimate for second quarter earnings is pegged at 16 cents. The company delivered positive earnings surprises in three of the past four quarters with an average surprise of 108.81%.
Monster Beverage is set to report second-quarter 2016 results on Aug 4, before market opens. This energy drink producer has an Earnings ESP of -1.92% and a Zacks Rank #3. The Zacks Consensus Estimate is pegged at $1.04. The company has delivered negative earnings surprises in two of the last four quarters and has an average negative surprise of 5.04%.
Monster Beverage’s revenues in the second quarter of 2016 are expected to gain traction from new products launched in the U.S in the past few quarters, solid international sales and growing momentum in the energy drink category. The company also expects gross margin expansion in the soon-to-be reported quarter. However, currency headwinds are likely to impact sales and profits. (Read: Monster Beverage Q2 Earnings: What's in the Cards?).
Stay tuned! Check later on our full write-up on earnings releases of these stocks.
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