The second-quarter earnings season has so far seen reports from 286 S&P 500 companies as of Jul 28 (per the Earnings Preview). The positive highlights of the season have been broad-based growth, a slew of positive surprises, record earnings tally as well as favorable trends.
In fact, with 214 members yet to release their results per the report, second-quarter earnings for the index are anticipated to improve 9.2% from the year-ago period, with total revenue rising to 5%.
According to the picture so far, we note that the pace of earnings and revenue growth is steadily accelerating relative to the pre-season expectations. Notably, the latest scorecard reveals that out of the 286 S&P 500 members that have come up with their quarterly numbers, approximately 74.5% delivered positive earnings surprises, while 69.2% surpassed top-line expectations. Total earnings for these companies were up 11.3% from the year-ago quarter, while revenues increased 6.1%.
The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, four are expected to witness an earnings decline in the second quarter. Of these, Conglomerates sector is likely to be a major drag.
What to Expect?
Of the various sectors, we are here focused on the Consumer Staples sector, which is currently placed at the top 13% of the Zacks classified sectors (2 out of 16). In the last six months, we note that the sector has gained 8.6%, which is in line with the S&P 500 index’s growth.
As of Jul 28, 41.9% of the total companies in the Consumer Staples sector have reported their results. Out of these, 53.8% have pulled off positive earnings surprise, while 61.5% outpaced revenue expectations.
Per the Earnings Preview, total earnings for the sector are anticipated to increase 4.9% while revenues are expected to grow 1.3%. This compares with year-over-year earnings and revenue growth of 4.7% and 3%, respectively, in the first quarter.
Consumer Staples Stocks Reporting on Aug 3
Let’s take a look at a couple of Consumer Staples stocks that are queued up for earnings releases on Aug 3. The Zacks model suggests that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a beat to happen.
The Clorox Company (CLX - Free Report) is likely to beat earnings estimates when it reports fourth-quarter fiscal 2017 results. This is because the company has an Earnings ESP of +0.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here, the Most Accurate estimate stands at $1.50 per share while the Zacks Consensus Estimate is pegged lower at $1.49. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Clorox anticipates boosting sales and volumes in the fiscal fourth quarter backed by the intense advertising and promotion investments to enhance brand value that were incurred in the previous quarter. It also envisions EBIT margin to improve in the quarter owing to lower selling and administrative costs. That said, management remains confident about delivering another year of top-line and bottom-line growth. (Read more: Can Clorox's Growth Efforts Track Earnings Beat in Q4?)
Next, let’s see what’s in store for Church & Dwight Co., Inc. (CHD - Free Report) , which is slated to report second-quarter 2017 results. This leading manufacturer and marketer of personal care, household and specialty products, is likely to beat earnings because it has the right combination of two key ingredients.
Church & Dwight has Earnings ESP of +2.56 as the Most Accurate estimate of 40 cents per share is pegged higher than the Zacks Consensus Estimate of 39 cents. Moreover, the company carries a Zacks Rank #3.
The company remains optimistic about its future performance backed by its portfolio of premium products, launch of innovative products, aggressive productivity programs and tight management of overhead expenses, along with robust sales and earnings growth. For the second quarter, it expects reported and organic sales growth approximately in the range of 1% to 2%. While gross margin for the first half is expected to be flat, adjusted earnings are expected to increase approximately 5%. (Read more: Is Church & Dwight Poised for a Beat in Q2 Earnings?)
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