Food Stocks' Earnings Slated For Oct 27: PF, BGS, LANC, MJN

The Q3 earnings season is in full swing and investors seem to be happy about positive signs of growth after five quarters of back-to-back declines. In fact, the pace of growth, which is currently slow, is expected to improve further in the coming days.

On summarizing the performance of the 116 S&P 500 members that have reported financial results so far, we see that 80.2% of the companies beat earnings and 62.9% surpassed revenue estimates, as per our Earnings Preview report. However, total earnings for these companies were up 0.1% year over year while revenues increased 1.5%.

In this scenario, investors are resorting to safe haven stocks and the consumer staples sector appears to be quite reliable.

Overall, the sector has reported modest results this quarter. Lower gas prices, an improving job scenario and increasing consumer confidence have been supporting the improvement in results. Notably, consumer confidence − a key determinant of the economy's health − surged for the second consecutive month in September and is now at its highest level since the Great Recession, indicating that the economy is on the recovery path.

In the consumer staples sector, 21.9% companies have reported Q3 earnings as of Oct 21. Out of these, 85.7% of the companies posted an earnings beat, while 57.1% have surpassed revenue estimates. Total earnings for the sector are expected to increase 2.2% on the back of 1.3% revenue growth and 0.1% higher margins, which might prove to be profitable in the long term.

Food/beverage stocks are particularly doing well this earnings season. Leading firms from the industry like McCormick & Company, Inc. (NYSE:MKC) , PepsiCo, Inc. (NYSE:PEP) and General Mills, Inc. (NYSE:GIS) have delivered better-than-expected Q3 earnings results despite currency headwinds and the sluggishness in emerging markets.

PepsiCo again reported stellar Q3 results late last month and also raised its full-year earnings growth target. McCormick too delivered better-than-expected results in the third quarter of fiscal 2016 and raised its financial guidance for fiscal 2016. Last month, General Mills also reported better-than-expected first-quarter fiscal 2017 earnings.

We believe that strong brand portfolio, continuous innovation, cost savings initiatives and acquisitions have cushioned these companies against headwinds, and are expected to remain their strengths.

Let’s see what awaits these four food stocks, which are scheduled to release their quarterly numbers on Oct 27.

Pinnacle Foods, Inc. (NYSE:PF) is slated to report results before the market opens. Last quarter, the company posted a positive earnings surprise of 5.00%. Additionally, it has delivered an average positive earnings surprise of 2.2% in the trailing four quarters.

The manufacturer and distributor of branded food products has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 52 cents. It has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our proven model does not conclusively show that Pinnacle Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. The company’s Zacks Rank #3 increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Pinnacle Foods actively manages its diverse portfolio of iconic food brands that enjoy strong household penetration in the U.S. Also, the company has undertaken several initiatives to reduce costs, coupled with strategic acquisitions to further expand its footprint and boost long-term growth. Despite these growth strategies, the company remains apprehensive of incurring higher introductory costs related to product innovation. Moreover, increased consumer marketing investment and currency headwinds are likely to hurt its profits. (Read: Pinnacle Foods to Report Q3 Earnings: What to Expect?).

B&G Foods, Inc. (NYSE:BGS) is slated to release its third-quarter 2016 results after the market closes. The company has an Earnings ESP of -15.39% and a Zacks Rank #3. Last quarter, this NJ-based shelf-stable and frozen food company posted a positive earnings surprise of 23.91%. However, the company missed estimates in only one out of the past four quarters, resulting in an average positive surprise of 10.89%.

While B&G Foods’ recent acquisitions have been driving sales, the base business has been hampered by lower volumes and currency headwinds. The company expects base business to remain flat year over year in the second half of 2016. (Read: B&G Foods to Report Q3 Earnings: What's in Store?).

Lancaster Colony Corporation (NASDAQ:LANC) , an OH-based specialty food products manufacturer, will report its first-quarter fiscal 2017 results before the market opens. It has an Earnings ESP of 0.00% and a Zacks Rank #2 (Buy).

Our proven model does not conclusively show that Lancaster is likely to beat earnings estimates this quarter. The company carries a Zacks Rank #2, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.13. This firm has delivered an average positive earnings surprise of 9.89% in the trailing four quarters.

Mead Johnson Nutrition Company (NYSE:MJN) , which manufactures, distributes, and sells infant formulas, children’s nutrition, and other nutritional products, will report its results before the opening bell. This food manufacturer has an Earnings ESP of -2.30% and a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Though the company is focusing on cost reduction measures and lowering its selling, general and administrative expenses, tough global economic environment is expected to hurt the top line. Currency headwinds and weak economic growth in the developing economies of Asia and Latin America are expected to mar the company’s performance. We are also disappointed with the company’s delay in its foreign trade process last quarter. We believe reduced shipments to Venezuela and requirement for additional product testing prior to import in China will affect the company’s forthcoming results as well. (Read more: Mead Johnson Q3 Earnings: Disappointment in Store?).

The Zacks Consensus Estimate is pegged at 87 cents. Additionally, the company has delivered an average positive earnings surprise of 4.34% in the trailing four quarters.

Stay tuned! Check later on our full write-up on earnings releases of these stocks.

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