The Q3 earnings season has started off on an encouraging note with multiple companies reporting positive earnings as well as sales surprises.
According to our latest Earnings Preview report, total earnings for the 34 S&P 500 members that have reported results (as of Oct 14) are up 1.3% from the year-ago quarter, courtesy of a 2.9% rise in revenues. Notably, 79.4% of the companies that have reported their quarterly numbers have beaten earnings estimates while 64.7% have surpassed top-line expectations.
Coming to the Consumer Discretionary sector, the space is expected to fare well this earnings season buoyed by an improving job scenario and increasing consumer confidence.
We note that though overall earnings for the sector in third-quarter 2016 are expected to be down 0.5% year over year, revenues are likely to surge 11.8%. Notably, during the second quarter, the sector witnessed an improvement of 8.2% and 7.6% in earnings and revenues, respectively.
Three consumer stocks are set to report their quarterly numbers on Oct 20. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for them this quarter:
Pool Corp. (POOL - Analyst Report) , the world's largest wholesale distributor of swimming pool supplies, equipment and related products, posted a positive earnings surprise of 3.66% last quarter. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an impressive average beat of 190.08%.
Notably, our proven model shows that an earnings beat is uncertain for Pool this time around. This is because, according to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise.
For the third quarter of 2016, the company has an Earnings ESP of 0.00% and a Zacks Rank #3, making it difficult to conclusively predict a beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at 99 cents.
Base business sales growth and favorable trends in the housing market should continue to boost Pool’s top and bottom line performance in the to-be-reported quarter. However, seasonality of the company’s business coupled with currency headwinds might limit revenue growth to some extent.
Snap-on Incorporated (SNA - Analyst Report) recorded a positive earnings surprise of 6.31% last quarter. Moreover, the company’s earnings outpaced the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 3.88%.
We note that Snap-on is unlikely to post a beat in third-quarter 2016 due to the combination of its Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. Meanwhile, the Zacks Consensus Estimate for the quarter’s earnings is pegged at $2.15.
Tools Group and Repair Systems & Information segments along with Snap-On’s flourishing financial services portfolio are expected to act as major profit churners in Q3. However, the ongoing softness in industrial markets, sluggish oil and gas market activities along with foreign currency fluctuations are likely to mar the company’s third quarter results (read more: Will Snap-On Disappoint this Earnings Season?).
Monro Muffler Brake Inc. (MNRO - Snapshot Report) , a provider of automotive undercar repair and tire services, registered a 2.04% positive earnings surprise in the previous quarter. Moreover, the trailing four-quarter average earnings surprise stands at a positive 0.38%.
For second-quarter fiscal 2017, the company has an Earnings ESP of 0.00%, which when combined with a Zacks Rank #3, makes surprise prediction difficult. Meanwhile, the Zacks Consensus Estimate for the quarter’s bottom line is pegged at 56 cents.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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