Kraft Foods Group, Inc. (KRFT) is set to report third-quarter fiscal 2013 results on Oct 30 after the market closes. Last quarter, the food company delivered a 27.0% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Although Kraft has been able to beat on earnings due to aggressive cost reduction and efficiency-improvement initiatives, its top-line performance has been sluggish ever since its split from Mondelez International, Inc. (MDLZ) in October last year.
Several of the company’s product categories have been soft due to consumption weakness and increased competitive activity. Kraft is still behind many peers on advertising and promotional spending which has been affecting the company’s sales performance. Accordingly, the company has plans to boost advertising investments which are expected to drive strong sales growth in the second half. However, these increased advertising investments could deter margins in the second half.
Earnings Whispers?
Our proven model does not conclusively show that Kraft Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Zacks ESP is 0.0%.
Zacks Rank. Kraft Foods’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a 0.0% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other food companies that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
The J. M. Smucker Company (SJM), with Earnings ESP of +0.63% and a Zacks Rank #2 (Buy).
Kellogg Company (K), with Earnings ESP of +2.25% and a Zacks Rank #3 (Hold).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment