Back to top

Analyst Blog

The Q3 earnings season is almost over, with results showing an improvement after five quarters of back-to-back declines. In fact, the pace of growth is expected to improve further in the coming days.

On summarizing the performance of the 470 S&P 500 members that have reported financial results so far, we see that total earnings of these companies were up 3.8% on a year-over-year basis (73.2% of the companies beat EPS estimates) while total revenue increased 2.6% (55.3% beat top-line expectations).

Overall third-quarter earnings for the S&P 500 companies are anticipated to be up 3.5% from the year-ago quarter on a 1.5% rise in revenues, per our Earnings Outlook report.

Though we are witnessing sluggish growth at the energy, autos, transportation and technology sectors, the consumer sector comprising consumer staples and the consumer discretionary sector has been performing well, of late.

In the consumer staples sector, 87.5% companies have reported results as of Nov 17. Out of these, 75.0% companies posted an earnings beat, while 35.7% 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.

Food/beverage stocks are particularly doing well this earnings season. Leading firms from the industry like Pinnacle Foods, Inc. (PF - Free Report) , The J.M. Smucker Company (SJM - Free Report) and Sysco Corp. (SYY - Free Report) have delivered better-than-expected earnings in their recently reported quarters despite currency headwinds and the sluggishness in emerging markets.

We believe that strong brand portfolio, continuous innovation, cost savings initiatives and acquisitions have cushioned these companies against headwinds, and are expected to remain their strengths.

Let’s see what awaits these three food stocks, which are scheduled to release their quarterly numbers early next week.

Tyson Foods, Inc. (TSN - Free Report) is slated to report fourth-quarter fiscal 2016 results on Nov 21, before the market opens. Last quarter, this producer, distributor and marketer of chicken, beef, pork and prepared foods posted a positive earnings surprise of 13.08%. It has delivered an average positive earnings surprise of 12.24% in the trailing four quarters.

The company has an Earnings ESP of -4.03% as the Most Accurate estimate of $1.19 is below the Zacks Consensus Estimate of $1.24. 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 Tyson Foods 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 (Buy) or 3 for this to happen. The company’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tyson Foods’ processed food business has been showcasing a decent performance. Further, the Hillshire Brands packaged foods buyout and healthy liquidity impart strength to the stock. However, the sluggish beef segment remains a concern. Moreover, macroeconomic headwinds have been weighing upon its performance to an extent. (Read: Tyson Foods Q4 Earnings: Will the Stock Disappoint?).

TYSON FOODS A Price, Consensus and EPS Surprise

 

TYSON FOODS A Price, Consensus and EPS Surprise | TYSON FOODS A Quote

Hormel Foods Corporation (HRL - Free Report) , one of the leading manufacturers and marketers of various meat and food products in the U.S. and international markets, is expected to release fourth-quarter fiscal 2016 results on Nov 22, before the market opens. The company currently has an Earnings ESP of +6.67% and a Zacks Rank #3.

This favorable combination makes the stock an attractive investment option. In addition, the stock promises a solid return of 20.1% on equity and 18.9% on investments. These prospects are again supported by the company’s efforts to improve its products.

Last quarter, this meat company posted a positive earnings surprise of 5.88%. In fact, it has delivered positive earnings surprises in all the past four quarters, translating to an average positive surprise of 9.05%.

HORMEL FOODS CP Price, Consensus and EPS Surprise

 

HORMEL FOODS CP Price, Consensus and EPS Surprise | HORMEL FOODS CP Quote

Campbell Soup Company (CPB - Free Report) is slated to report first-quarter fiscal 2017 results on Nov 22, before the market opens. Last quarter, the company posted a negative earnings surprise of 8%. However, it has outperformed the Zacks Consensus Estimate by an average of 4.3% in the trailing four quarters.

Our proven model does not conclusively show that Campbell is likely to beat earnings estimates this quarter. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. The Zacks Consensus Estimate for first-quarter earnings is pegged at 95 cents.

Campbell’s exposure to the international markets keeps it prone to currency fluctuations. Though management expects this headwind to have a nominal impact on the company’s fiscal 2017 performance, it still remains a hurdle. Nevertheless, Campbell’s focus on its strategic initiatives like portfolio reorganization and cost-cutting efforts can help it overcome these obstacles. (Read: Campbell Q1 Earnings: What's in Store for the Stock?)

CAMPBELL SOUP Price, Consensus and EPS Surprise

 

CAMPBELL SOUP Price, Consensus and EPS Surprise | CAMPBELL SOUP Quote

Stay tuned! Check later on our full write-up on earnings releases of these stocks.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>