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Zacks #1 Stocks on the Move 07/29/2016

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Analyst Blog

Keryx (KERX) Q2 Earnings Preview: Will the Stock Gain?

Posted Fri Jul 29, 05:13 pm ET

by Zacks Equity Research

Keryx Biopharmaceuticals, Inc. KERX is expected to report second-quarter 2016 results on Aug 3.

Keryx’s track record has been disappointing so far. Over the four trailing quarters, the company posted an average negative earnings surprise of 16.50%, having met expectations twice and missed the same on the other two occasions.  Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Apart from license fees, Keryx’s top line comprises revenues generated by Auryxia (ferric citrate). Auryxia (approved for the control of serum phosphorus levels in patients with chronic kidney disease (CKD)) is the growth engine at Keryx.

In Sep 2015, Keryx gained EU approval for Fexeric (EU trade name for Auryxia) for the control of elevated serum phosphorus levels, or hyperphosphatemia, in both dialysis and pre-dialysis patients suffering from CKD, marking an important milestone for the company. Keryx is now looking for partners for the EU launch of the drug, where it is facing pricing issues following the introduction of generic Renvela in certain marketplaces.

We note that Keryx is investing a lot of resources in the commercialization of Auryxia. The company expanded its field-based team to 95 sales representatives. Increasing coverage and additional reach should help boost sales.

Demand for Auryxia is driven by continued gains from new prescribers as well as an increase in the number of prescriptions per prescriber.

Although the company did not provide a quarterly guidance, it did provide an annual guidance. Keryx expects Auryxia sales in the U.S to be $31–$34 million. Demand is expected to grow further as the company realizes the full impact of its expanded sales force. It projects 2016 cash operating expenses in the range of $87 million to $92 million. Cost of goods sold, as a percentage of net Auryxia sales, is anticipated in the mid-20s.

Meanwhile, Keryx is also working on expanding ferric citrate's label. Ferric citrate (the compound name for Auryxia in additional indications) is being evaluated in a phase III study for the treatment of iron-deficiency anemia (IDA) in patients suffering from stage III–V NDD CKD. The study met its primary endpoint and all prespecified secondary endpoints. Keryx plans to submit a supplemental new drug application (sNDA) in the third quarter of 2016.

What Our Model Indicates

Our proven model shows that Keryx is likely to beat estimates this quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and Keryx has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +27.59%. This is because both the Most Accurate estimate stands at a loss of 21 cents, while the Zacks Consensus Estimate stand at a loss of 29 cents.

Zacks Rank: Keryx’s Zacks Rank #2 when combined with a positive ESP, makes us reasonably confident of positive surprise this season.

Conversely, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

KERYX BIOPHARMA Price and EPS Surprise

KERYX BIOPHARMA Price and EPS Surprise | KERYX BIOPHARMA Quote

Other Stocks You May Consider

Here are a few other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Ironwood Pharmaceuticals IRWD has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Exelixis, Inc. EXEL has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is scheduled to report results on Aug 3.

Impax Laboratories IPXL has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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Xcel Energy (XEL) Q2 Earnings: Stock Likely to Disappoint

Posted Fri Jul 29, 05:06 pm ET

by Zacks Equity Research

Xcel EnergyInc. XEL will release second-quarter 2016 financial results before the market opens on Aug 3. Last quarter, this electric and natural gas utility’s earnings recorded a positive earnings surprise of 2.17%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors to Consider

The company expects more load to come in and electricity sales to improve in the second half of 2016, implying that second-quarter electricity sales will be almost on par with first-quarter sales and lower than the second half.

However, above-average temperatures in its service territories in the second quarter, along with improving economic fundamentals, are expected drive top-line growth.

Earnings Whispers

Our proven model does not conclusively show that Xcel Energy is likely to beat earnings estimates this quarter. That 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. This is not the case here, as you will see below.

Zacks ESP: The company has an Earnings ESP of -2.44% because the Most Accurate estimate stands at 40 cents while the Zacks Consensus Estimate is pegged at 41 cents.

XCEL ENERGY INC Price and EPS Surprise

XCEL ENERGY INC Price and EPS Surprise | XCEL ENERGY INC Quote

Zacks Rank: Xcel Energy has a Zacks Rank #4.As it is, 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.

Stocks to Consider

Here are a few stocks in the utility space worth considering on the basis of our model, as they have the right combination of elements to post an earnings beat this quarter:

Pattern Energy Group Inc. PEGI has an Earnings ESP of +100.00% and a Zacks Rank #3. It is expected to report earnings on Aug 8.

Avista Corp. AVA has an Earnings ESP of +2.33% and a Zacks Rank #2.It is slated to report earnings on Aug 3.

The AES Corp. AES has an Earnings ESP of +11.11% and a Zacks Rank #3.It is slated to report earnings on Aug 5.

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What's in Store for Tableau Software (DATA) in Q2 Earnings?

Posted Fri Jul 29, 04:47 pm ET

by Zacks Equity Research

Tableau Software, Inc. DATA is set to release second-quarter 2016 results on Aug 2. Last quarter, the company delivered a negative earnings surprise of 35.56%. The company has delivered negative earnings surprises in each of the last four quarters, with an average miss of 190.12%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Tableau Software is placed well to benefit from rising demand for business analytics tools. The company has been seeing strength in its offerings like the hybrid data architecture platform. The company has been taking a number of initiatives to boost its sales productivity and align its marketing efforts to drive growth.

However, the company’s growth has been slowing down. It hasn’t made profits yet. Ballooning expenses weigh on financials despite its efforts to control costs and cut down on hiring. Moreover, recently, the company witnessed some insider selling activity, which makes us less confident about the company’s performance in the to-be reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Tableau Software is likely to beat earnings 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. That is not the case here as you will see below.

Zacks ESP: Tableau Software has an Earnings ESP of -2.70%. This is because the Most Accurate estimate stands at a loss of 38 cents while the Zacks Consensus Estimate is pegged at a loss of 37 cents.

Zacks Rank:  Tableau Software’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.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

TABLEAU SOFTWAR Price and EPS Surprise

TABLEAU SOFTWAR Price and EPS Surprise | TABLEAU SOFTWAR Quote

Stocks to Consider

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Zoetis Inc ZTS has an earnings ESP of + 2.27% and a Zacks Rank #1.

LATAM Airlines Group S.A. LFL has an earnings ESP of +166.67% and a Zacks Rank #2.

Expeditors International of Washington EXPD has an earnings ESP of +3.45% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Can Cerner (CERN) Spring a Surprise This Earnings Season?

Posted Fri Jul 29, 04:45 pm ET

by Zacks Equity Research

Cerner Corporation CERN is expected to report second-quarter 2016 results on Aug 2. Last quarter, the company reported earnings of 58 cents per share, which was in line with the Zacks Consensus Estimate.

Notably, the company’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 1.87%.

Let's see how things are shaping up for this quarter.

Factors at Play

We believe that Cerner’s strong product portfolio will help it boost its customer base. The frequent contract wins reflect growing traction. Moreover, the company has strong growth opportunities in the revenue cycle management (RCM) and ambulatory market.
 

CERNER CORP Price and EPS Surprise

CERNER CORP Price and EPS Surprise | CERNER CORP Quote

For the second quarter of 2016, Cerner forecasts revenues between $1.175 billion and $1.25 billion. The mid-point of the guided range reflects 8% year-over-year growth.

Cerner also projects new business bookings between $1.35 billion and $1.48 billion. At mid-point, this reflects 10% growth on a year-over-year basis.

Adjusted earnings (before share-based compensation expense and acquisition-related adjustments) are now expected in the range of 56 cents to 58 cents. At mid-point, this reflects 10% growth on a year-over-year basis.

However, the HCIT market is highly competitive which exerts considerable pressure on both pricing and margins. Moreover, a growing proportion of low-margin services and technology resale may affect margins. Further, stringent hospital budgets continue to exert pressure on pricing, which is an added concern.

Earnings Whispers

Our proven model does not conclusively show that Cerner is likely to beat earnings this quarter. That 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. That is not the case here as you will see below.

Zacks ESP: Cerner has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 53 cents.

Zacks Rank: Cerner has a Zacks Rank #3 which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.

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.

Stocks to Consider

Here are a few stocks worth considering that, per our model, have the right combination of elements to post an earnings beat this quarter:

Nektar Therapeutics NKTR with an Earnings ESP of +50.00% and Zacks Rank #1.

GlycoMimetics Inc. GLYC with an Earnings ESP of +13.64% and Zacks Rank #1.

ANI Pharmaceuticals Inc. ANIP with an Earnings ESP of +2.63% and a Zacks Rank #1.

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What's in Store for Prothena (PRTA) This Earnings Season?

Posted Fri Jul 29, 04:44 pm ET

by Zacks Equity Research

Prothena Corporation plc PRTA is expected to report second-quarter 2016 results on Aug 2.

Prothena’s track record has been has dismal so far. Over the four trailing quarters, the company’s earnings have missed estimates thrice and beat the same once, with an average negative earnings surprise of 6.51%.

Let's see how things are shaping up for this announcement.

Factors at Play

With no approved product in its portfolio yet, investor focus should remain on pipeline updates by the company. Currently, its pipeline has three lead candidates – NEOD001 for the treatment of AL amyloidosis, PRX003 for the treatment of psoriasis and PRX002 for the treatment of Parkinson’s disease and other related synucleinopathies. The company’s top line mainly comprises collaboration revenues under its license agreement with Roche Holding AG (RHHBY) for PRX002.

NEOD001 is in a phase III study (the VITAL Amyloidosis Study) for the treatment of primary systemic amyloidosis (AL amyloidosis). The study is designed to support full global regulatory registration. The company also initiated a randomized, registration-directed, global phase IIb study, PRONTO, on NEOD001 in previously treated AL amyloidosis patients with persistent cardiac dysfunction. Top-line results from the study are expected in late 2017 or early 2018. Enrollment in the VITAL study is expected to be completed by the second quarter of 2017.

Meanwhile, both PRX002 and PRX003 are being evaluated in phase I studies. The company is currently conducting a phase I multiple ascending dose study on PRX002 in patients with Parkinson's disease and expects to report top-line results from the multiple ascending dose study in the fourth quarter of 2016.

The company is also conducting a phase I study on PRX003 for evaluating its safety, tolerability, pharmacokinetics and immunogenicity in the treatment of psoriasis and other inflammatory diseases. Results demonstrated that PRX003 was generally safe and well tolerated, following a single infusion, up to and including the highest dose level tested (30 mg/kg).

The company also initiated a double-blind, placebo-controlled, multiple ascending dose, phase Ib study on PRX003 in patients with psoriasis. Top-line results from the study are expected by the second half of 2017.

Like any other development-stage biotechnology company, Prothena is likely to see an increase in research and development expenses due to higher spending on pipeline development.

What Our Model Indicates

Our proven model does not conclusively show that Prothena is likely to beat estimates this quarter. That 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. Unfortunately, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Prothena is 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 89 cents.

Zacks Rank: Prothena currently carries a Zacks Rank #3. Although Prothena’s Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

PROTHENA CP PLC Price and EPS Surprise

PROTHENA CP PLC Price and EPS Surprise | PROTHENA CP PLC Quote

Stocks to Consider

Here are a couple of health care stocks you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Ironwood Pharmaceuticals IRWD has an Earnings ESP of 13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Exelixis, Inc. EXEL has an Earnings ESP of 3.70% and a Zacks Rank #3. The company is scheduled to report results on Aug 3.

Impax Laboratories IPXL has an Earnings ESP of 3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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Teradata (TDC) Q2 Earnings: What to Expect This Time?

Posted Fri Jul 29, 04:36 pm ET

by Zacks Equity Research

Teradata Corp. TDC is set to report second-quarter 2016 results on Aug 2. Last quarter, the company posted a 19.35% positive earnings surprise.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Teradata is a leading provider of data warehousing and enterprise analytics. The company is well positioned to benefit from robust growth in the data warehousing market based on a strong product portfolio, customer wins, strategic partnerships and accretive acquisitions. Teradata’s international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market should be another set of positives for the company.

The company plans to exit its Marketing Application business to build up its capabilities in the growing Data and Analytics business, which will likely impact its profits in the near term. Simultaneously, the company is also working to optimize its cost structure and streamline its operations, which are expected to benefit the company’s financials in this year itself.

This apart, increasing competition from peers like Oracle ORCL and IBM Corp. IBM remain concerns.

Earnings Whispers

Our proven model does not conclusively show that Teradata is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Teradata currently has an Earnings ESP of +5.88% ESP as the Most Accurate estimate of 51 cents is lower than the Zacks Consensus Estimate of 54 cents.

Zacks Rank: Teradata currently has a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

TERADATA CORP Price and EPS Surprise

TERADATA CORP Price and EPS Surprise | TERADATA CORP Quote

Stock to Consider

Here is a stock worth considering that, as per our model, has the right combination of elements to post an earnings beat this quarter:

LATAM Airlines Group S.A. LFL has an earnings ESP of +166.67% and a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download7 Best Stocks for the Next 30 Days. Click to get this free report >>

U.S. Silica (SLCA): What Will Q2 Earnings Release Unveil?

Posted Fri Jul 29, 04:32 pm ET

by Zacks Equity Research

U.S. Silica Holdings, Inc. SLCA is set to release second-quarter 2016 results after the closing bell on Aug 2.

Last quarter, this producer of commercial silica had delivered a positive earnings surprise of 32.14%. U.S. Silica surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while missing in the other two, with an average positive surprise of 9.08%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

U.S. Silica witnessed persistent pressure on both volumes and pricing in its Oil and Gas segment during first-quarter 2016, due to weaker business conditions and increasingly competitive market environment. However, the company's Industrial and Specialty Products segment recorded improvement in its business, recording sequential and year-over-year increases in contribution margin, bolstered hugely by a combination of strategic price increases implemented earlier in 2016 and a larger mix of higher-margin products during the quarter.

In 2016, the company plans to eliminate roughly $40 million in costs above the $40 million in expenses that it took out last year. It is taking further actions to cut overheads, increase operational efficiency, optimize shipping and renegotiate supplier contracts. Though some of these costs are expected to come back as energy markets improve, the company expects that most of the savings will be permanent and will further elevate its competitive position in the marketplace.

The company aims to manage its cash wisely and give priority to critical-maintenance and cost-improvement projects. At the same time, the company plans to internally simplify by eliminating unnecessary and cumbersome processes and procedures and improving customer response times.

U.S. Silica believes that it is in a stronger position to achieve meaningful accretive M&A, considering its recently-completed equity offering. It projects that oil prices, while relatively stable at the moment, will remain lower-for-longer, and that the company will continue to face challenges from lower drilling and completion activity, an intensely competitive market and lower industry demand for its Oil and Gas products in the near-term.

For the Industrial business, the company expects to record a healthy bottom-line growth in 2016, supported by the price hikes and the consistent rollout of new higher-margin products. A significant portion of the ISP business is tied to the automotive and residential housing markets, and demand from these key end-use markets is expected to stay solid in 2016.

Earnings Whispers

Our proven model shows that U.S. Silica is likely to beat earnings because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is the case here, as you will see below.

Zacks ESP: Earnings ESP for U.S. Silica is +8.70%. This is because the Most Accurate Estimate stands at a loss of 21 cents, while the Zacks Consensus Estimate is pegged at a loss of 23 cents.

Zacks Rank: U.S. Silica currently has a Zacks Rank #2 (Buy) which has a significantly higher chance of beating earnings.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies in the basic materials sector you may want to consider instead, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

B2Gold Corp. BTG has an Earnings ESP of +50% and a Zacks Rank #1 (Strong Buy).

Hi-Crush Partners LP HCLP has an Earnings ESP of +4.35% and a Zacks Rank #3 (Hold).

Alamos Gold, Inc. AGI has an Earnings ESP of +100% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Papa John (PZZA) to Report Q2 Earnings: What's in Store?

Posted Fri Jul 29, 04:26 pm ET

by Zacks Equity Research

Papa John's International Inc.PZZA is set to report second-quarter 2016 earnings on Aug 2. Last quarter, the company posted a positive surprise of 9.52%. It managed to beat the Zacks Consensus Estimate in two of the trailing four quarters and matched the same in one quarter. Its average four-quarter positive earnings surprise is 3.55%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Papa John's has been delivering positive comps in both domestic and international markets since the beginning of 2014. The company’s brand revitalization initiatives such as unit expansion, menu innovation and international expansion have contributed significantly to its comps growth.

Meanwhile, the company is investing in technology-driven initiatives like digital ordering in order to capitalize on the digital wave that has hit the U.S. fast casual restaurant sector. These initiatives are expected to positively impact results in the soon-to-be-reported quarter. On the other hand, costs incurred to execute these initiatives are likely to dent profits in the quarter.

Also, like other restaurant companies, rising labor costs, remain a material headwind for the company. Additionally, with many of Papa John’s restaurants located in international markets, the company remains highly vulnerable to fluctuations in exchange rates. Hence, unfavorable foreign exchange translation may hurt sales and profits in the international markets in the to-be-reported quarter.

PAPA JOHNS INTL Price and EPS Surprise

PAPA JOHNS INTL Price and EPS Surprise | PAPA JOHNS INTL Quote

Earnings Whispers

Our proven model does not conclusively show that Papa John’s is likely to beat earnings 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. But that is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 54 cents. Hence, the company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: Papa John’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few companies in the restaurant industry which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Dave & Buster's Entertainment, Inc. PLAY, with an Earnings ESP of +2.27% and a Zacks Rank #1.

Jack in the Box JACK, with an Earnings ESP of +1.15% and a Zacks Rank #2

Shake Shack Inc. SHAK, with an Earnings ESP of +7.69% and a Zacks Rank #3 

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Kraft Heinz (KHC): What Will Q2 Earnings Release Unveil?

Posted Fri Jul 29, 04:24 pm ET

by Zacks Equity Research

The Kraft Heinz Company KHC is scheduled to report second-quarter 2016 results on Aug 4, after the closing bell. Last quarter, the company delivered a positive earnings surprise of 19.67%.

The packaged food manufacturer delivered positive earnings surprises in three of the past four quarters with an average surprise of 4.46%.

Let’s see how things are shaping up for this announcement.

KRAFT HEINZ CO Price and EPS Surprise

KRAFT HEINZ CO Price and EPS Surprise | KRAFT HEINZ CO Quote

Factors to Consider

Kraft Heinz has been seeing top-line weakness over several past quarters. The company is witnessing lower volumes and share losses in the U.S. due to weak category trends. Reduced spending by the U.S. shoppers and a shift in consumer preference toward natural and organic ingredients over packaged and processed food has been hurting the company’s business. Category trends and market share performance are likely to remain under pressure in the second quarter and through the rest of 2016.

Despite relatively soft sales, cost savings have led to better margins, primarily in the developed markets of the U.S. and Europe. We expect the trend to continue in the second quarter. A part of these savings are being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth.

Earnings Whispers

Our proven model does not conclusively show that Kraft Heinz is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 2.82% as the Most Accurate estimate stands at 73 cents while the Zacks Consensus Estimate is pegged lower at 71 cents.

Zacks Rank:Kraft Heinz has a Zacks Rank #4.

Note that we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank include:

The J. M. Smucker Company SJM, with an Earnings ESP of +4.07% and a Zacks Rank #1 (Strong Buy).

Post Holdings, Inc. POST, with an Earnings ESP of 12.5% and a Zacks Rank #2 (Hold).

Omega Protein Corp. OME, with an Earnings ESP of +2.13% and a Zacks Rank #1.

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What to Expect from EXCO Resources' (XCO) Q2 Earnings?

Posted Fri Jul 29, 04:07 pm ET

by Nilanjan Choudhury

Independent natural gas producer EXCO Resources Inc. XCO is set to release its second-quarter 2016 results after the closing bell on Tuesday, Aug 2.

In the preceding three-month period, the Dallas, TX-based upstream player delivered a positive earnings surprise of 36.36% despite the challenges that a steep drop in oil price tagged along. This was primarily owing to strong cost control measures.

As far as the earnings surprise history is concerned, the company has an excellent record: its beaten estimates in each of the last four quarters with an average beat of 35.43%.

 

EXCO RESOURCES Price, Consensus and EPS Surprise

EXCO RESOURCES Price, Consensus and EPS Surprise | EXCO RESOURCES Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Unlike the previous few quarters, second-quarter 2016 turned out to be a rather good one with natural gas advancing more than 49% sequentially – the best quarterly percentage gain in 11 years. Natural gas futures during the Apr–Jun 2016 period hovered mostly between $2 and $3 per million Btu (MMBtu). With the commodity comprising around 90% of EXCO Resources’ total production, the price improvement bodes well for the company.

Moreover, to a large extent, the company’s successful cost reduction initiatives are expected to cushion the results.

However, EXCO Resources’ core operational region – the Haynesville shale – has seen a drastic fall in the number of gas rigs employed. From 25 at 2015-end, the number is expected to hit single digits pretty soon. Production is likely to suffer in this case. 

Earnings Whispers

Our proven model does not conclusively show that EXCO Resources will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at a loss of 7 cents.

Zacks Rank: EXCO Resources has a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for EXCO Resources, here are some domestic upstream you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

Legacy Reserves L.P. LGCY has an Earnings ESP of +31.58% and a Zacks Rank #1. The company is expected to release earnings results on August 3.

EOG Resources Inc. EOG has an Earnings ESP of +2.00% and a Zacks Rank #2. The company is anticipated to release earnings on August 4.

Devon Energy Corp. DVN has an Earnings ESP of +4.55% and a Zacks Rank #2. The company is likely to release earnings on August 2.

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