We are heading toward the last leg of the fourth-quarter earnings season with 375 of the S&P 500 companies have already reported their results on board. We observed that the ongoing 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 Outlook as of Feb 15, 2017, earnings for the total S&P 500 companies will improve 7.4% from the year-ago period, with total revenue rising by 3.9%.
As per the report, out of the 375 S&P 500 companies that have come up with their quarterly numbers, approximately 68.8% posted positive earnings surprises, while 54.4% beat top-line expectations. Total earnings for these index members were up 7.2% 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 10.5%, while revenues are anticipated to jump 4.1%. As of Feb 15, 81.3% of the total number of S&P 500 companies in this sector has reported their results. Out of these, 57.7% companies posted an earnings beat, while 38.5% surpassed revenue estimates.
Food Stocks form part of the Consumer Staples sector. So, let’s see what awaits the following food stocks that are queued up earnings releases on Feb 17.
Leading food products company, Campbell Soup Company CPB is slated to report second-quarter fiscal 2017 results. Last quarter, the company delivered a positive earnings surprise of 5.3%. However, it posted average negative surprise of 0.7% in the trailing four quarters. Further, we note that the Zacks Consensus Estimate for the impending quarter has increased by a penny to 88 cents in the past 30 days.
Our proven model does not conclusively show that Campbell Soup is likely to beat earnings estimates this quarter. 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 can see the complete list of today’s Zacks #1 Rank stocks here.
Campbell Soup has an Earnings ESP of -1.14%. This is because, the Most Accurate estimate of 87 cents stands well below the Zacks Consensus Estimate of 88 cents. However, the company carries a Zacks Rank #3. While a favorable Zacks Rank increases the predictive power of ESP, we need to have a positive ESP in order to be confident about earnings surprise. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Campbell Soup has been benefitting from its strategic initiatives. Further, the company is generating better-than-expected results from the three-year cost savings program, which is likely to drive growth. However, the company has been witnessing soft performance at Campbell Fresh lately due to weak carrot sales and the lingering effect of the Bolthouse Farms product recall. Also, Campbell Soup’s global presence exposes it to foreign currency headwinds, which is expected to have a nominal impact on the company’s fiscal 2017 performance. (Read more: Campbell Soup to Report Q2 Earnings: What's in Store?)
Finally, let’s see what’s in store for The J. M. Smucker Company SJM, which is set to report third-quarter fiscal 2017 results. The company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average of 19.2%. We observed that the Zacks Consensus Estimate for the third quarter has declined 2 cents to $2.00 in the past 30 days.
Smucker has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.00. Further, the company has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Smucker profitability largely depends on the prices of green coffee. Coffee prices are highly volatile and are affected by weather and pest infestation. Recently, management raised the prices of the majority of its packaged coffee products sold in the U.S. This might weigh upon the company’s sales volume, alongside hurting its coffee segment. Looking forward, the currency headwinds are expected to linger through fiscal 2017. Nevertheless, management remains optimistic of performing well, buoyed by its acquisitions and innovation programs. (Read more: Smucker Q3 Earnings: Is the Stock Set to Disappoint?)
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