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Consumer Staples Stock Earnings On May 2: TAP, KHC & More

By Zacks Investment ResearchStock MarketsApr 30, 2018 10:42PM ET
Consumer Staples Stock Earnings On May 2: TAP, KHC & More
By Zacks Investment Research   |  Apr 30, 2018 10:42PM ET
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The picture so far this earnings reporting cycle has been quite rosy. Per the latest Earnings Preview, 267 S&P 500 members have reported quarterly results. So far, 76.8% of these companies have delivered positive earnings surprises, while 73.8% beat top-line expectations. Earnings of these companies have increased 25.1% from the year-ago quarter, while revenues have risen 10%.

Further, earnings and revenues are well on track to mark the highest growth in seven years. As a whole, earnings for the S&P 500 companies are anticipated to improve 22.6% year over year on revenue growth of 8.4%. In fourth-quarter 2017, earnings and revenues rose 13.4% and 8.6%, respectively.

A Look at Consumer Staples

The performance of the index is determined by all 16 Zacks sectors, out of which 15 are expected to witness year-over-year earnings growth this season. The Consumer Staples sector being one of them is expected to record earnings growth of 6.8% and revenue increase of 3.1%.

The Consumer Staples sector is currently placed at the bottom 6% (15 of 16) of all Zacks sectors, thanks to several bottlenecks. The sector has long been grappling with rising input costs as well as intense competition. This, in turn, has created significant pricing pressure, compelling companies to undertake aggressive promotional activities. Owing to such deterrents, the sector has lost 5.9% in a year, while the S&P 500 market gained 11.7%.

Amid such challenges, companies operating in the segment have been trying to keep afloat through innovation, strategic buyouts and restructuring efforts in sync with a changing consumer landscape. Additionally, the recent tax cuts are expected to favor Consumer Staples companies.

Considering the diverse factors, let’s see what’s in store for the following stocks when they release their quarterly results on May 2.

Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

How Are TAP, KHC, CLX and EL Placed

Molson Coors Brewing Company (NYSE:TAP) is expected to witness year-over decline in revenues in first-quarter 2018, owing to soft sales volumes in the United States. For the quarter under review, analysts polled by Zacks expect net sales of $2,436 million, down from $2,449 million in the year-ago quarter. Also, input cost inflation is a concern as management expects input cost inflation in 2018 to be nearly $50 million greater than 2017, on account of aluminum and diesel fuel among other inputs. To top it, Molson Coors has a Zacks Rank #4 (Sell) and Earnings ESP of -0.21%, which dim the possibility of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nevertheless, the company is focused on strengthening its above premium category along with expanding its portfolio through innovation. It has also been undertaking several restructuring initiatives to reduce costs and boost profits. Given these factors, along with expected gains from tax reforms, Zacks analysts expect earnings in the quarter to grow 5.3% year over year to 80 cents. However, the estimate has gone down by 4 cents over the past 30 days. (Read More: Will Soft U.S. Volumes Dent Molson Coors Q1 Earnings?)

The Kraft Heinz Company (NASDAQ:KHC) has been experiencing top-line weaknesses for a while, thanks to unfavorable demand conditions in the United States and Canada. Further, the company’s performance in first-quarter 2018 is expected to be dented by increased retail competition in developed markets, Ore-Ida supply deficits as well as the impact of some pricing actions. (Read More: Will Weak Sales Hurt Kraft Heinz's Earnings in Q1?)

Owing to such factors, analysts polled by Zacks expect only nominal growth in Kraft Heinz’s first-quarter sales. Further, the consensus mark for earnings is pegged at 82 cents, reflecting a 2.4% year-over-year fall.

This Zacks Rank #3 company has been striving to boost its performance through savings initiatives, innovations and strategic investments to enhance brand performance. However, such efforts are less likely to reflect in the results this season. Further, owing to its Earnings ESP of -0.20%, a bottom-line beat seems unlikely this time around.

The Clorox Company’s (NYSE:CLX) third-quarter fiscal 2018 performance is likely to benefit from dedicated brand management, cost savings and productivity initiatives. Also, it undertakes strategic partnerships to expand capabilities across its online and brick-and-mortar platforms. Recently, management agreed to buy Nutranext, the Florida-based dietary supplements leader, for $700 million. Additionally, it is progressing with the smooth execution of its 2020 Strategy, which is aimed at boosting growth for the improvement of categories and overall market share. In the light of such factors, analysts polled by Zacks expect quarterly revenues of $1,511 billion, up 2.3% from the year-ago quarter.

However, Clorox witnessed significant pressure on gross margin in the fiscal second quarter, which is likely to continue. Margin was strained by escalated input costs for commodities and tightening of the transportation market. Also, results were hurt by strategic investments in growth and cost-saving initiatives, which might continue to drive expenses and hurt profits. As a result, the Zacks Consensus Estimate of $1.30 for the quarter under review moved south by a penny over the last 30 days and reflects a decline of 0.8% year over year. Further, Clorox’s Earnings ESP of -0.33% and a Zacks Rank #4 indicate there are little chances of an earnings beat this earnings season. (Read More: Will Clorox Retain Positive Earnings Trend in Q3?)

The Estee Lauder Companies Inc.’s (NYSE:EL) third-quarter fiscal 2018 results are expected to reflect well-chalked buyouts, innovation, saving efforts, extensive market reach as well as robust online and travel retail network. This cosmetics stalwart has made several strategic acquisitions, such as BECCA and Too Faced, to enhance its portfolio. It also boasts a strong online business and expects it to be a major growth catalyst in the years to come. Estee Lauder continues to focus on enhancing travel retail business, which has lately emerged as a major sales driver. Management stated that growth in this category is majorly fueled by continued investments in emerging markets, particularly Asia, along with double-digit increase in five of its biggest brands in the travel retail network.

Buoyed by such factors, the company expects adjusted earnings per share in the range of $1.02-$1.04 for the third quarter, which marks a considerable increase from the prior projection of 91 cents. On a constant currency basis, adjusted earnings are expected to improve 7-9%. The Zacks Consensus Estimate for earnings is pegged at $1.07. Moreover, the company’s Earnings ESP of +0.67% combined with a Zacks Rank #3 makes us reasonably confident of an earnings beat this season.

Further, analysts polled by Zacks expect revenues of $3,234 million, up 13.2% from the prior year. Also, management forecasts sales growth of 12-13% in the third quarter.

However, management anticipates lower sales from North America due to a decline in retail traffic in the U.S. brick-and-mortar stores. Also, the company has been grappling with gross margin declines for over four quarters now. (Read More: Factors Likely to Impact Estee Lauder's Q3 Earnings)

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Molson Coors Brewing Company (TAP): Free Stock Analysis Report

The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report

The Kraft Heinz Company (KHC): Free Stock Analysis Report

The Clorox Company (CLX): Free Stock Analysis Report

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Consumer Staples Stock Earnings On May 2: TAP, KHC & More
Consumer Staples Stock Earnings On May 2: TAP, KHC & More

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