With the Q2 earnings season in full swing, investors are waiting to see how the major companies perform.
While estimating the performances of agricultural stocks, we note that headwinds like a cyclical downturn of the agricultural industry, weak agro product prices, appreciation of the U.S. currency and economic slowdown in emerging markets like China might limit growth.
According to the Zacks Industry classification, the agricultural industry is broadly grouped under Basic Materials, one of the 16 Zacks sectors. Per our latest Earnings Preview article, this industry is likely to underperform this earnings season.
In fact, our report dated Jul 22, 2016 indicates that overall earnings for the sector are expected to plunge 13.9% year over year in Q2, while revenues are expected to fall 7.7%. Notably, the sector had witnessed a decline of 15.7% and 8.6% in earnings and revenues, respectively, in Q1.
Recently, two of the leading companies from this sector– Monsanto Company MON and Syngenta AG SYT – reported their quarterly results. Monsanto’s diluted earnings in fiscal Q3 came in at $2.17 per share. The company’s bottom line not only missed the Zacks Consensus Estimate by 10% but also deteriorated 13.5% year over year. Syngenta, on the other hand, reported diluted earnings of $12.69 per share at the end of first-half 2016. The company’s earnings also plummeted 14% year over year.
With more and more companies slated to report their results soon, let’s take a look at how these two agricultural stocks might fare.
What Awaits These Agricultural Bigwigs?
Potash Corporation of Saskatchewan Inc. POT is set to release Q2 results, before the market opens on Jul 28. Our proven model does not conclusively show that Potash Corp. is likely to beat estimates this quarter. This is because the company carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of -5.56%. Also, over the last 60 days, the Zacks Consensus Estimate has been revised downward for the to-be-reported quarter. Weak demand and crop prices are expected hurt the company’s revenues and margins in Q2. (Read more: Potash Corp: Will its Earnings Disappoint in Q2?).
Bunge Limited BG is stated to report Q2 results, before the market opens on Jul 28. In the last four quarters, the company reported a negative average earnings surprise of 3.55%. Our proven model does not conclusively show that Bunge Limited is likely to beat on earnings this quarter. This is because the company has an Earnings ESP of -36.96%. Though the company carries a favorable Zacks Rank #2 (Buy), its negative ESP makes surprise predictions inconclusive. Moreover, the Zacks Consensus Estimate for the stock has been revised downwards for Q2, over the last 60 days.
Don’t miss on our full earnings release articles for these two agricultural stocks, as the actual results might hold some surprises!
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