Is A Beat In Store For Pinnacle Foods (PF) In Q1 Earnings?

Pinnacle Foods Inc. (NYSE:PF) is slated to report first-quarter 2017 results on Apr 27, before the market opens. The question lingering in investors’ minds is whether this leading manufacturer and marketer of branded food products will be able to post a positive earnings surprise in the to-be-reported quarter. The company outpaced the Zacks Consensus Estimate in two of the trailing four quarters, with an average of 1.7%.

Shares of Pinnacle Foods increased 32.5% in the past one year, outperforming the Zacks categorized Food – Miscellaneous/Diversified industry that gained 2.3%. On the other hand, the broader Consumer Staples sector, of which they are part of, grew 3.7% in the same time frame. Per the latest Earnings Preview, the earnings growth for the sector looks decent. While, total earnings for the Consumer Staples sector are estimated to rise 2.4%, revenues are projected to improve 4.0%.

Let’s delve deeper how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate for the first quarter and 2017 has been stable over the past 30 days. In fact, the current Zacks Consensus Estimate of 46 cents and $2.57 for the first quarter and 2017 reflects a year-over-year growth of 15% and 19.5%, respectively.

Moreover, analysts polled by Zacks expect revenues of $769.4 million for the said quarter, up 2% from the year-ago quarter. Revenues for 2017 are projected to grow 2.8% to $3.2 billion.

Factors Influencing the Quarter

Pinnacle Foods actively manages its diverse portfolio of iconic food brands that enjoy strong household penetration in the U.S. It also regularly undertakes product innovation in a bid to offer variety and maintain its market share. Evidently, the company is gaining from its increased volume and favorable productivity mix as well as robust acquisitions, particularly the Boulder Brands acquisition, completed in Jan 2016. Alongside, Pinnacle Foods has an operational excellence program in place designed to generate annual productivity savings across the supply chain, besides taking initiatives to enhance its margins.

However, higher introductory costs related to innovation, increased consumer marketing investment, input cost inflation and currency headwinds are likely to hurt profits.

Moreover, the company has witnessed sluggish net sales and adjusted EBIT for the Specialty segment since past three consecutive quarters, despite solid growth in the Snacks business. Due to a heightened competitive bidding environment for the already low-margin USDA stew business, the company continues to expect Specialty to remain challenged through 2017, particularly in the first quarter, reflecting lower sales of private label canned meat. Further, it has witnessed sluggishness in Duncan Hines business due to continued category weakness and a heightened promotional environment in 2016, though it improved marginally in the second half of the year.

What Does the Zacks Model Unveil?

Our proven model shows that Pinnacle Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pinnacle Foods has an Earnings ESP of +2.17%. This is because the Most Accurate estimate of 47 cents is pegged higher than the Zacks Consensus Estimate of 46 cents. In addition, the company’s Zacks Rank #2 makes us reasonably confident of an earnings beat.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Energizer Holdings, Inc. (NYSE:ENR) has an Earnings ESP of +5.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archer-Daniels-Midland Company (NYSE:ADM) has an Earnings ESP of +1.64% and a Zacks Rank #3.

Newell Brands Inc. (NYSE:NWL) has an Earnings ESP of +6.90% and a Zacks Rank #3.

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