The third-quarter earnings season is in its last leg, with 470 S&P 500 companies having already reported results as of Nov 17. We notice that results in the third quarter have improved remarkably from the preceding quarters. In fact, this is expected to be the first quarter to display bottom-line growth after five consecutive seasons of earnings decline for the benchmark index.
Food Stocks: Safe Investment Bets
U.S.-based food stocks are considered to be the safest investment bets at the moment. This is because these stocks are the least impacted by any sort of global macroeconomic turbulence.
Improved job data and robust wage rates have driven demand for edible products in the U.S. Apart from strong domestic demand, food stocks are likely to perform well on the back of new product launches and productive marketing programs.
According to the Zacks Industry classification, food stocks are broadly grouped under Consumer Staples, one of the 16 Zacks sectors.
Here we briefly discuss the broader sectors’ earnings trend so far in the July-September quarter of 2016.
Our latest Earnings Trends article (released on Nov 17, 2016) reveals that roughly 87.5% of the Consumer Staples stocks in the S&P 500 Group that have reported results for the July-September quarter recorded 6.2% rise in earnings on 1.5% increase in revenues, both on a year-over-year basis. We believe that earnings of
Consumer Staples stocks in the S&P 500 Index will increase 6.6% year over year, while revenues are expected to inch up 1.1% from the prior-year period.
What’s in Store for These Two Food Stocks?
Hormel Foods Corporation (HRL - Free Report) is slated to report fourth-quarter fiscal 2016 (ended Oct 31, 2016) results before the opening bell on Nov 22. The company’s average positive earnings surprise over the trailing four quarters is 9.05%.
Our proven model shows that Hormel Foods is likely beat earnings in the quarter. This is because the stock has the right combination of two key ingredients.
Hormel Foods has an Earnings ESP of +6.52%, as the Most Accurate estimate of 49 cents is above the Zacks Consensus Estimate of 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Hormel Foods has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conversely, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.
Higher demand for value-added products (in both food service and retail channels) and the company’s strategic marketing programs are expected to drive the better-than-expected earnings in the fiscal fourth quarter. (Read more: Hormel Foods’ Q4 Earnings: What is in the Cards?).
Campbell Soup Company (CPB - Free Report) is set to report first-quarter fiscal 2017 (ended Oct 31, 2016) results before the opening bell on Nov 22. The company’s average positive earnings surprise over the last four quarters is 4.25%.
Our proven model does not conclusively show that Campbell Soup will beat estimates in the quarter. This is because the company has an Earnings ESP of 0.00% (as the Most Accurate estimate is in line with the Zacks Consensus Estimate of 95 cents), which complicates surprise prediction in spite of the company’s favorable Zacks Rank #3 (Hold).
Meaningful product portfolio expansion and strategic cost-cutting measures are expected to boost results in the quarter-to-be-reported. However, headwinds like adverse foreign currency translation might limit growth. (Read more: Campbell Q1 Earnings: What's in Store for the Stock?).
Don’t miss on our full earnings release articles for these two food stocks, as the actual results might hold some surprises!
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