We expect meat processor Tyson Foods Inc. TSN to beat expectations when it reports second-quarter fiscal 2015 results on May 4, before the opening bell. Last quarter, it posted a 6.9% positive earnings surprise.
Why a Likely Positive Surprise?
Our proven model shows that Tyson is likely to beat earnings estimates because it has the right combination of two key ingredients.
Zacks ESP: Tyson Foods currently has an Earnings ESP of +1.37%. This is because the Most Accurate estimate of 74 cents per share is pegged higher than the Zacks Consensus Estimate of 73 cents.
Zacks Rank: Tyson carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
The combination of Tyson’s Zacks Rank #3 and +1.37% ESP makes us confident of an earnings beat on May 4.
What's Driving the Better-than-Expected Earnings?
Tyson’s continuous product innovations and strong momentum in most of its business segments which are driving sales should help it to post modest gains in the to-be-reported quarter.
There is a general shift of demand among health conscious consumers from red meat to low-calorie chicken and processed chicken food items. This has helped the chicken segment drive higher gains in the recent quarters.
Moreover, the company witnessed strong demand for value added chicken and tray packs which drove sales in the chicken segment over the past few quarters. This is expected to continue in the second quarter of fiscal 2015 as well.
Other Stocks to Consider
Tyson is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies:
Treehouse Foods Inc.THS, with an Earnings ESP of +1.72% and a Zacks Rank #3.
Post Holdings Corporation. POST, with an Earnings ESP of +54.55%and a Zacks Rank #3.
Constellation BrandSTZ, with an Earnings ESP of +0.82% and a Zacks Rank #3.
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