Molson Coors Brewing Co. (NYSE:TAP) is set to report third-quarter 2016 results before the opening bell on Nov 1. Last quarter, this beverage company posted a negative earnings surprise of 2.63%. It should be noted that the company has posted two positive and two negative earnings surprises in the last four quarters, resulting in an average positive surprise of 6.64%.
Let’s see how things are shaping up prior to the announcement.
Factors to Consider
We note that Molson Coors has been struggling with weak volumes in the major markets of Canada, the U.S. and Europe over the past several quarters. Despite a modest recovery in the macroeconomic scenario, the company witnessed a year-over-year decline in earnings and revenues throughout 2015, as well as the first and second quarters of 2016 due to lower volumes and unfavorable foreign currency movements. We expect weak volumes to hinder growth in the to-be-reported quarter.
Nevertheless, the company’s cost-savings initiatives, continuous focus on brand building and increased marketing investments should have a positive impact on third-quarter results, in our view.
Our proven model does not conclusively show that Molson Coors is likely to beat earnings this quarter. This is 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. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Molson Coors is -6.00% as the Most Accurate estimate of 94 cents is lower than the Zacks Consensus Estimate of $1.00. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Molson Coors’ Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some consumer staple companies, which are worth considering, as our model shows that they have the right combination of these two elements.
Avon Products, Inc. (NYSE:AVP) with an Earnings ESP of +33.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sanderson Farms, Inc. (NASDAQ:SAFM) with an Earnings ESP of +9.62% and a Zacks Rank #1.
Sysco Corporation (NYSE:SYY) with an Earnings ESP of +1.70% and a Zacks Rank #2.
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