The second-quarter earnings season (or the quarter ended Jun 30, 2016) is on its last leg. With almost 92.1% of S&P 500 companies already having reported their quarterly results the overall earnings picture is becoming clearer.
Per the Zacks Earnings Scorecard, the quarter saw a 3.7% decrease in earnings due to a 0.7% dip in revenues, both on a year-over-year basis. The Q2 2016 is the fifth quarter in a row to display a declining trend in earnings.
Nevertheless, we note a sequential improvement in earnings. Interestingly, this quarter is witnessing positive revenue growth and is currently reversing the trend displayed in the preceding quarter. Almost 71.1% of the companies surpassed earnings estimates, while 52.9% outpaced top-line expectations in the second quarter.
The second-quarter earnings season is critical for investors to ascertain the most attractive picks as the market has somewhat stabilized after Brexit, which shook the global economy in Jun 2016. Post Brexit, investors became jittery and have been resorting to safe haven stocks.
In this scenario, the consumer sector might be quite reliable. So far, the consumer sector has reported modest results this quarter.
As of Aug 10, 2016, 80.6% companies from the consumer staples sector enlisted in the S&P 500 index have reported second-quarter earnings. Out of these, 72% of the companies have posted an earnings beat, while 52% surpassed revenue estimates. Leading firms from the industry like Altria Group Inc. MO, Tyson Foods Inc. TSN, The Hershey's Company HSY, Pinnacle Foods, Inc. PF, B&G Foods, Inc. BGS, Colgate-Palmolive Co. CL, Mondelez International, Inc. MDLZ are among the ones that delivered modest Q2 earnings despite currency headwinds and sluggishness in emerging markets.
In the consumer discretionary sector, 94.3% of the companies have reported earnings. Out of these, 87.9% topped earnings estimates and 52% surpassed revenue expectations. Consumer discretionary stocks like Apollo Education Group, Inc. APOL, Coach, Inc. COH, and The Walt Disney Company DIS reported decent Q2 earnings backed by higher revenues and margins..
With the current earnings cycle drawing to a close, some more companies are scheduled to report their financial results this week. Let's take a look at how some of these companies might fare.
Sysco Corporation SYY is set to report fourth-quarter fiscal 2016 results before the opening bell on Aug 15. The Earnings ESP for Sysco is 0.00% and the company holds a Zacks Rank #2 (Buy). Though stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a higher chance on beating on earnings, the company's 0.00% Earnings ESP complicates surprise prediction.
Last quarter, this global food products maker and distributor posted a positive earnings surprise of 9.52%. The company beat earnings estimates in two quarters and reported in-line earnings in the remaining two with an average positive surprise of 6.65% in the last four quarters.
The company's strong business portfolio and strategic acquisitions have been driving growth. Encouragingly, Sysco delivered higher gross margins in the past one year period after witnessing declining gross margins in the last two fiscal years. The company's growth strategy seems to be paying off and its efforts to boost sales and margins are likely to have a favorable impact on its results in the to-be-reported quarter. However, Sysco expects food cost deflation and currency translation to adversely affect fiscal fourth-quarter results. The company believes that deflation headwinds will persist in the fiscal fourth quarter as well, which will limit earnings growth. (Read: Will Food Cost Deflation Dampen Sysco's Q4 Earnings?)
Burcon Nutrascience Corporation BUR is set to report first-quarter fiscal 2017 results on Aug 12. The company carries a Zacks Rank #3 but has an Earnings ESP of 0.00%. In spite of the company's favorable Zacks Rank, the surprise prediction is complicated by its 0.00% Earnings ESP. Burcon Nutrascience reported a positive earnings surprise of 40.00% in the preceding quarter and an average positive surprise of 30.00% for the trailing four quarters. The Zacks Consensus Estimate is currently pegged at a loss 5 cents per share for the fiscal first quarter.
Barfresh Food Group Inc (BRFH) is set to report second-quarter 2016results on Aug 15. The company carries a Zacks Rank #3 but has an Earnings ESP of 0.00%. The company has a favorable Zacks Rankbut its 0.00% Earnings ESPrenders surprise prediction inconclusive. It reported in-line results in the preceding quarter and an average negative surprise of 16.67% for the trailing four quarters. The Zacks Consensus Estimate is currently pegged at a loss 3 cents per share for the second quarter.
Don't miss out on our full earnings release articles for these stocks, as the actual results might hold some surprises!
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DISNEY WALT DIS: Free Stock Analysis Report
BARFRESH FD GRP (BRFH): Free Stock Analysis Report
SYSCO CORP SYY: Free Stock Analysis Report
HERSHEY CO/THE HSY: Free Stock Analysis Report
TYSON FOODS A TSN: Free Stock Analysis Report
B&G FOODS CL-A BGS: Free Stock Analysis Report
BURCON NUTRA CP BUR: Free Stock Analysis Report
APOLLO GROUP APOL: Free Stock Analysis Report
COLGATE PALMOLI CL: Free Stock Analysis Report
COACH INC COH: Free Stock Analysis Report
ALTRIA GROUP MO: Free Stock Analysis Report
MONDELEZ INTL MDLZ: Free Stock Analysis Report
PINNACLE FOODS PF: Free Stock Analysis Report
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