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Food Stocks Slated to Report Q1 Earnings on May 1: MDLZ, ADM

Zacks Equity Research
Updated

The first-quarter earnings season is past the halfway mark, with more than 900 companies including 142 S&P 500 members due to report results this week.

According to the latest Earnings Preview, results of 267 S&P 500 members are already out. As of Apr 27, 2018, total earnings for these S&P 500 members were up 25.1% year over year on more than 10% higher revenues. Of these, 76.8% surpassed earnings estimates, while 73.8% beat revenue expectations.

Total earnings for the S&P 500 index are likely to increase 22.6% from the same period last year on 8.4% higher revenues. Total earnings for consumer staples companies are expected to grow 6.8% while revenues are likely to increase 3.1% in the first quarter of 2018.

Some of the key players in the sector — Procter & Gamble PG, PepsiCo PEP and Coca-Cola KO — have already released their quarterly numbers. Procter & Gamble, popularly known as P&G, reported third-quarter fiscal 2018 financial results, wherein both earnings and revenues surpassed expectations, benefiting from higher demand for skincare products, along with fabric and home care products. The company has also lifted its core earnings per share guidance.

PepsiCo reported first-quarter 2018 results, with earnings and revenues both beating the Zacks Consensus Estimate. Notably, this is the eighth consecutive quarter of positive earnings surprise for the company. The improvement was mainly attributable to strong performances in its international divisions, propelled by higher revenue growth in developing and emerging markets.

Coca-Cola started 2018 on a strong note, beating the consensus mark on both counts in the first quarter. Apart from a significant rise in soda volumes, the cola giant gained from its growing beverage portfolio and restructuring efforts. Cost-cutting initiatives led by refranchising of its low-margin bottling operations, helped it to come up with better numbers.

Let’s take a look at what’s in store for the following stocks within the consumer staples sector that are scheduled to release first-quarter 2018 results on May 1.

Mondelez International, Inc. MDLZ delivered a positive earnings surprise of 1.79% last quarter. The Oreo-maker surpassed estimates in all the trailing four quarters, with the average positive surprise being 4.43%.

Our proven model does not conclusively show that Mondelez is likely to beat earnings estimates this quarter 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. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Mondelez has an Earnings ESP of +0.34% and 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 witnessing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The food industry within the consumer staples sector has been witnessing sluggish growth and slowdown in consumption for the past few quarters. The industry is experiencing changes in consumer preference (for example, a shift toward products with less artificial sweeteners, sodium and saturated fat) and consumer dynamics (such as increased need for portable and on-the-go products), demographic shifts and also a shift in demand for low-priced products.

Mondelez, like other legacy brands including General Mills Inc. GIS, The Kraft Heinz Company KHC and The Kellogg Company K, has been facing challenges to boost its volume since 2014.

Nonetheless, in order to counter the tepid sales trend, Mondelez has been focusing on innovation and brand building. The company has also undertaken some major steps to improve margins, cash flow and return on invested capital. Mondelez’s to-be-reported quarter’s results are likely to gain from its Power Brands, favorable trends in emerging markets, higher pricing, productivity and cost saving initiatives, partly offset by higher input costs.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 61 cents, indicating a 15.1% year-over-year increase. Meanwhile, the Zacks Consensus Estimate for total revenues is pegged at $6.66 billion, implying 3.8% growth.

(Read More: Will Cost Saving Plans Aid Mondelez's Q1 Earnings?)
 

Mondelez International, Inc. Price and EPS Surprise

 

Mondelez International, Inc. Price and EPS Surprise | Mondelez International, Inc. Quote

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Archer-Daniels-Midland Company ADM is a leading food processing company. In the last reported quarter, the company delivered a positive earnings surprise of 17.14%. The company has a mixed record of earnings surprise in the trailing four quarters, with an average beat of 1.7%.

Our proven model does not show that Archer Daniels is likely to beat earnings estimates in the to-be-reported quarter. Archer Daniels sports a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.

Archer Daniels has a dismal surprise history. In fact, the company has been lagging sales estimates for more than three years now. Notably, analysts polled by Zacks expect first-quarter revenues to be $14.52 billion, down 3.1% from the year-ago quarter. Though the company delivered earnings beat in fourth-quarter 2017, it recorded negative surprise in eight of the preceding 10 quarters. This drab performance can be attributed to fluctuating commodity prices, oversupply in the industry and unfavorable margins.

However, Archer Daniels’ focus on cost savings to strengthen its business has been offsetting the sales headwind to some extent. Overall, the Zacks Consensus Estimate for earnings of 50 cents for the quarter under review reflects a decline of 16.7% year over year. (Read more: What's in the Offing for Archer Daniels' Q1 Earnings?).
 

Archer Daniels Midland Company Price and EPS Surprise

 

Archer Daniels Midland Company Price and EPS Surprise | Archer Daniels Midland Company Quote

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Coca-Cola Company (The) (KO) : Free Stock Analysis Report
 
Pepsico, Inc. (PEP) : Free Stock Analysis Report
 
General Mills, Inc. (GIS) : Free Stock Analysis Report
 
Kellogg Company (K) : Free Stock Analysis Report
 
Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
 
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
 
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
 
Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
 
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