The Q3 earnings season is in its last leg with 455 S&P 500 members, representing 91% of the index’s total market capitalization, having already reported their results. However, there are some big tech and retail names that are scheduled to report this week.
As of Nov 11, total earnings of these companies were up 3.9% on a year-over-year basis (72.7% of the companies beat EPS estimates) while total revenue increased 2.7% (55.4% beat top-line expectations).
Investors seem to be happy about positive signs of growth this reporting cycle after five quarters of back-to-back declines. In fact, the pace of growth, which is currently slow, should improve further in the coming days. The third quarter’s results can be interpreted as an inflection point where the growth trend is finally shifting from the negative to the positive territory.
Overall third-quarter earnings for the S&P 500 companies are anticipated to be up 3.4% from the year-ago quarter on a 1.5% rise in revenues, as per our Earnings Preview report.
Though we are witnessing sluggish growth at the energy, autos, transportation and technology sectors, the consumer staples sector has been performing well, of late.
In the consumer staples sector, 84.4% companies have reported results as of Nov 11. Out of these, 74.1% companies posted an earnings beat, while 37.0% surpassed revenue estimates. Total earnings for the sector are expected to increase 6.6% on the back of 1.1% revenue growth and 0.7% higher margins, which might prove to be profitable in the long term.
We believe that strong brand portfolio, continuous innovation, cost savings initiatives and acquisitions have cushioned these companies against headwinds. Also, these are expected to remain their strengths.
Let’s see what awaits these two consumer staples stocks, which are scheduled to release their quarterly numbers on Nov 16.
Hillenbrand Inc. (HI - Free Report) , the holding company for Batesville Casket Company, a leader in the North American death care industry, is set to report fourth-quarter fiscal 2016 results before the market opens. Last quarter, this global diversified industrial company posted a positive earnings surprise of 3.92%. However, it has delivered negative surprises in three of the trailing four quarters with an average of 6.32%.
The company has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 57 cents. It has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our proven model does not conclusively show that Hillenbrand is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. The company’s Zacks Rank #3 increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Hillenbrand’s focus on acquisitions, its global presence and margin expansion through operational improvement have been driving earnings since the past few quarters. However, the company has been facing certain challenges over the past year, including unfavorable currency, deficit environment for capital investments and a slowdown in some key markets, especially China. Additionally, the company projects lower volume in the burial market this year due to an increase in cremation rate. Management continues to expect challenging end markets for the Process Equipment Group and Batesville in fiscal 2016. (Read: Hillenbrand to Report Q4 Earnings: What's in Store?).
Smart & Final Stores, Inc. (SFS - Free Report) is slated to release its third-quarter 2016 results after the market closes. The company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Last quarter, the company posted a negative earnings surprise of 5.56%. Out of the past four quarters, the company posted in-line earnings in two quarters, a positive surprise in one and a negative surprise in the other, resulting in an average positive surprise of 3.97%. The Zacks Consensus Estimate for third-quarter earnings is pegged at 14 cents.
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