Tyson Foods Inc. TSN is set to report third-quarter fiscal 2015 results on Aug 3, before the opening bell. Last quarter, the company posted a 2.7% positive earnings surprise.
In fact, Tyson delivered positive earnings surprises in three out of the trailing four quarters, bringing the average to 3.26%.
Let's see how things are shaping up for this announcement.
Factors at Play
Tyson’s continuous product innovations and strong momentum in most business segments drove sales and helped post modest results in the past few quarters. The trend is expected to continue in the third quarter as well.
Tyson transformed from a protein processor with one brand to a protein-centric consumer packaged goods company having a number of brands following the Hillshire acquisition last year. The takeover added leading brands like Jimmy Dean, Ballpark and State Fair to its portfolio.
However, skyrocketing input prices are posing a threat to the company. Although corn prices are at a record low, higher cattle prices have affected the operating margins and volumes in the Beef segment over the past few quarters. Such trends are expected to negatively affect the third-quarter margins too.
Earnings Whispers
Our proven model does not conclusively show that Tyson Foods is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimate. However, that is not the case here due to the following factors:
Negative Zacks ESP: ESP for Tyson Foods is -1.05% as the Most Accurate estimate is 94 cents per share while the Zacks Consensus Estimate stands at 95 cents.
Zacks Rank: Tyson’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings 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 other companies that investors may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Campbell Soup Company CPB, with an Earnings ESP of +2.38% and a Zacks Rank #1.
Dean Foods Company DF, with an Earnings ESP of +3.85% and a Zacks Rank #2 (Buy).
Hanesbrands Inc. HBI, with an Earnings ESP of +4.0% and a Zacks Rank #2.
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