As we delve deeper into the ongoing earnings season, we note that the first quarter of 2017 is witnessing significant improvement over the past periods. Per the Earnings Outlook, as of May 3, 2017, earnings for the total S&P 500 companies are likely to improve 11.9% from the year-ago period, with total revenue rising 6.2%.
Per the report, out of the 358 S&P 500 companies that have come up with their quarterly numbers, approximately 74.3% posted positive earnings surprises, while 65.9% outperformed the top-line expectations. Total earnings for these index members were up 12.9% from the year-ago quarter, while revenues increased 7.9%.
In fact, performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, three are expected to witness an earnings decline. Of these, Autos and Transportation are likely to be the major drags.
Food Stocks form part of the Consumer Staples sector. Per the report, about 62.5% of the S&P 500 companies in the Consumer Staple sector have reported their results, wherein 65% companies posted an earnings beat, while 25% surpassed revenue estimates. Earnings rose 3.8% year over year and revenues inched up 0.1%. While the earnings growth for the sector looks decent, the sector appears to be struggling in terms of revenues beating estimates.
Notably, Consumer Staples is currently the last of all 16 Zacks sectors, probably due to a difficult sales environment. Meanwhile, total first-quarter earnings for the Consumer Staples sector are estimated to rise 4.2%, revenues are projected to improve 4%. However, the sector is currently placed at bottom 38% of the Zacks Classified sectors (10 out of 16).
So, let’s see what awaits the following food stocks that are queued up for earnings releases on May 8.
Sysco Corporation (SYY - Free Report) , the global food products maker and distributor, is slated to report third-quarter fiscal 2017 results, before the market opens. The company’s earnings have outpaced the Zacks Consensus Estimate in five straight quarters now, with a trailing four-quarter average of 9.3%.
Our proven model does not conclusively show earnings beat for Sysco this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Sysco has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 51 cents. Though the company’s Zacks Rank #3 increases the predictive power of ESP, but we need to have a positive ESP in order to be confident about earnings surprise.
Sysco has a strong business portfolio and has been taking initiatives to reduce costs. Also, the company has been carrying out various acquisitions to grow its distribution network and customer base. However, Sysco remains concerned about the deflationary trend which is likely to continue in the fiscal year 2017, creating modest sales and gross profit headwind. (Read more: Sysco to Report Q3 Earnings: What Awaits the Stock?)
Another food stock Tyson Foods, Inc. (TSN - Free Report) , leading meat producer, is set to report second-quarter fiscal 2017 results before the opening bell. The company’s earnings exceeded the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 6.8%.
Tyson Foods has an Earnings ESP of +3.77%. This is because the Most Accurate estimate of $1.10 is pegged higher than the Zacks Consensus Estimate of $1.06. Moreover, it carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The combination of the company’s Zacks Rank #2 and an Earnings ESP of +3.77% makes us optimistic about earnings beat.
Tyson has also been focusing on acquisitions to expand its portfolio. We expect, its recent acquisition of AdvancePierre Foods to enable the company to grow in the fastest growing portfolio of protein packed brands and expand its fresh prepared foods offering for both out-of-home and in-home eating occasions. Additionally, it is focusing on providing meat-based snacks to consumers who are refraining from purchasing candy and overly processed foods. (Read more:Is Tyson Foods Poised for a Beat in Q2 Earnings?)
Now, let’s take a sneak peek at Post Holdings, Inc. (POST - Free Report) , the manufacturer and marketer of branded ready-to-eat cereals, which is scheduled to report second-quarter fiscal 2017 results after the closing bell. Its earnings have outpaced the Zacks Consensus Estimate in five straight quarters now, with a trailing four-quarter average of 46.5%.
Post Holdings has an Earnings ESP of +1.67%. This is because the Most Accurate estimate of 61 cents is pegged above the Zacks Consensus Estimate of 60 cents. Moreover, it carries a Zacks Rank #3. This combination makes us confident of earnings beat.
Finally, let’s see what’s in store for Snyder's-Lance, Inc. , the manufacturer and marketer of branded and private label snack foods and bakery products. It is set to report first-quarter 2017 results, before the market opens. Last quarter, it had delivered negative earnings surprise of 5%. However, it posted an average earnings beat of 7% in the past four quarters.
Snyder's-Lance has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 14 cents. Moreover, it has a Zacks Rank #5 (Strong Sell), which complicates our prediction of an earnings surprise.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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