Nearly all sectors are approaching the last leg of the fourth-quarter earnings season, with 71.6% of the S&P 500 companies having already reported their results on board. We observed that this earnings season has, so far, projected a favorable picture. Also, investors seem to be impressed as the quarter is all set to break the past quarterly records, marking the best performance in the last two years.
Per the Zacks Earnings Preview as of Feb 10, 2017, earnings for the total S&P 500 companies will improve 7.5% from the year-ago period, with total revenue rising by 3.9%.
As per the report, out of the 358 S&P 500 companies that have come up with their quarterly numbers, approximately 69% posted positive earnings surprises, while 54.7% beat top-line expectations. Total earnings for these index members were up 6.1% from the year-ago quarter, while revenues increased 4.6%.
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. Of these, Autos, Transportation and Conglomerates are likely to be a major drag.
While the Consumer Staples sector is showing positive signs with total earnings expected to grow 10.6%, revenues are anticipated to be up 4.1%. As of Feb 10, 71.9% of the total number of S&P 500 companies in this sector has reported results. Out of these, 60.9% companies posted an earnings beat (growing 9.4% year over year), while 39.1% surpassed revenue estimates (increasing 2.8% year over year).
Let’s take a look at what’s in store for the following consumer staples stocks which are likely to release their fourth-quarter 2016 results on Feb 16.
We start with Avon Products, Inc. AVP, which has missed the Zacks Consensus Estimate significantly by an average of 112.5% in the past four quarters. Further, we note that the Zacks Consensus Estimate for fourth-quarter 2016 has declined by a penny to 9 cents in the past seven days.
Avon has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 9 cents. The company’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This leading global beauty company seems to be in recovery mode after being in a rough patch for quiet sometime due to back-to-back dismal quarterly performances. Though the company’s surprise trend is yet to recover, we believe that optimism is creeping into Avon’s stock performance on account of the progress of its Transformation Plan that was announced in Jan 2016. (Read more: Can Avon's Transformation Plan Drive Q4 Earnings?)
Next, let’s take a sneak peek at Nu Skin Enterprises, Inc. NUS, the beauty and wellness products company, which has posted positive earnings average surprise of 7.5% in the trailing four quarters.
Our proven model does not conclusively show that Nu Skin Enterprises is likely to beat earnings estimates in the fourth quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nu Skin Enterprises has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 80 cents. Moreover, the company carries a Zacks Rank #4 (Sell). 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. (Read more: Nu Skin Q4 Earnings: Disappointment in the Cards?)
Finally, let’s see what’s in store for e.l.f. Beauty, Inc. ELF, a cosmetic company, which is expected to report results tomorrow. The company had posted a negative earnings surprise of 100% in third-quarter 2016. However, we observed that the Zacks Consensus Estimate for the fourth quarter and 2016 has been largely stable ahead of the earnings release.
e.l.f. Beauty has an Earnings ESP of 0.00%, with both the Most Accurate estimate and the Zacks Consensus Estimate pegged at 13 cents. However, the company carries a Zacks Rank #3. While the company’s favorable Zacks Rank increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>
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
To read this article on Zacks.com click here.
Zacks Investment Research