The earnings season is nearing its last leg and the picture so far appears to be quite encouraging. Per the Earnings Preview dated Aug 4, 86.7% of the S&P 500 members have reported results. Out of the 420 S&P 500 companies that have reported their quarterly numbers, approximately 74.3% delivered positive earnings surprises, while 68.3% beat top-line expectations.
Further, earnings for these companies have advanced 11.6% from the same period last year, with revenues up 5.6%. While results announced so far showcases year-over-year growth in both top and bottom lines, the pace of the same has decelerated sequentially. Nevertheless, the fraction of companies that have topped earnings and revenue estimates have increased from the last quarter.
Further, the report suggests that earnings for the total S&P 500 companies for this quarter are projected to improve 10% year over year, with total revenue rising 5.1%. Thus, the overall picture looks favorable for this reporting cycle.
A Look at Consumer Staples
The performance of the index is determined by all 16 Zacks sectors, out of which 13 are estimated to witness year-over-year earnings growth. The Consumer Staples sector, which also houses major foods stocks, seems to be one of them. Per the report, about 70% of the S&P 500 companies in the Consumer Staple sector have reported their results, wherein 66.7% companies delivered an earnings beat, while 61.9% surpassed revenue estimates. Though earnings of these companies rose 5.7%, revenues dipped 0.7%.
The Consumer Staples sector is currently ranked among the Top 13% (2 of 16) of all Zacks sectors. The sector seems to be in good shape, thanks to rising consumer confidence, which in turn has received impetus from an improving labor market, oil prices that have rebounded from all-time lows, and housing segment recovery. However, volatile input costs remain an obstacle for the sector (particularly the food space).
While the Consumer Staples sector has grown 9.5% year to date, it lagged the S&P 500 market’s jump of 10.8%. So, let’s see what awaits the following Food stocks that are queued up for second-quarter 2017 earnings releases on Aug 8.
Well our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Let’s See How DF, ARMK, TWNK & LNCE Are Placed
Leading processor and distributor of milk and other dairy products Dean Foods Company (DF - Free Report) is set to report second-quarter results. While the company currently carries a Zacks Rank #3 (Hold), our earnings beat criteria was let down by its Earnings ESP of -6.45%.
Dean Foods’ performance remains challenged by rising competition and escalated raw milk costs. The company’s business is also heavily dependent on commodities such as soybeans, diesel fuel and others, the prices of which often fluctuate. Hence, any rise in their prices will hurt margins. However, contributions from Friendly’s acquisition have been providing a boost to ice cream sales volumes. This in turn is aiding the top line. We also applaud the company’s efforts to grow in the organic space, which is evident from its recent deals with Good Karma and Organic Valley as well as the acquisition of Uncle Matt's juices. Further, its focus on cost productivity and growth plans bode well. With such strategic initiatives in place, we can hope that Dean Foods would be able to boost its performance. (Read more: Will Dean Foods' Earnings Disappoint Again in Q2?)
Moving to Aramark (ARMK - Free Report) , this provider of food services, facilities management, uniform and career apparel, currently carries a Zacks Rank #3. However, the company’s current Earnings ESP is 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate for the quarter under review are pegged at 35 cents. We note that while a favorable Zacks Rank #3 increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.
Taking a sneak-peek at HOSTESS BRANDS (TWNK - Free Report) , we note that the company is involved in developing, manufacturing, marketing, selling and distributing sweet goods primarily in the United States. We prefer to wait and see what’s in the cards for this food stock’s upcoming earnings release as Hostess Brands has an Earnings ESP of 0.00%, with both its estimates pegged at 19 cents and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Finally, let’s assess the earnings beat criteria for Snyder's-Lance, Inc. (LNCE - Free Report) . Like the aforementioned companies, the surprise prediction for this stock is difficult too, given its Zacks Rank #3 and an Earnings ESP of 0.00%. The company’s Most Accurate estimate coincides with the Zacks Consensus Estimate of 27 cents. Well, Snyder's-Lance is engaged in the manufacture, market and distribution of a variety of branded and private label snack foods and bakery products.
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