Church & Dwight Co. Inc. (CHD) is slated to report its third-quarter 2014 results on Nov 3. In the last quarter, the company had delivered a positive earnings surprise of 6.56%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Management expects its product portfolio, introduction of innovative products and cost containment strategies to continue to boost bottom-line and top-line results. Also, its recent acquisition of the gummy vitamin business has been facilitating sales. However, the company continues to battle competitive headwinds and soft consumer demand owing to which we remain cautious of its performance.
For this quarter, the company expects organic sales of 3%, a decline of 150 basis points in gross margin, owing to greater investments in the laundry category, coupled with unfavorable mix. Earnings per share are envisioned in the band of 80–82 cents for the quarter.
Earnings Whispers?
Our proven model does not conclusively show that Church & Dwight 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, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 82 cents.
Zacks Rank: Church & Dwight carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
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 this quarter:
Best Buy Co., Inc. (BBY) has an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).
L Brands, Inc. (LB) has an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy).
The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #2.
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