Kraft Foods Group, Inc. (KRFT) is set to report fourth-quarter fiscal 2013 results on Feb 13 after the market closes. Last quarter, it posted a 4.4% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Kraft’s top-line performance has been sluggish ever since it split from Mondelez International, Inc. (MDLZ) in Oct 2012 due to a tough consumer environment.
Several of the food company’s product categories have been soft due to consumption weakness and increased competitive activity. Especially, the salad dressings, powdered beverages and ready-to-eat desserts categories have been sluggish.
In the third quarter, difficult volume comparisons and a tough consumer environment hurt sales. At the third-quarter conference call, management pointed out that shopper trips are going down, especially the large ones as consumers are still purchasing only what they need. However, in the fourth quarter, the company expects slightly better growth from the North American food and beverage market due to easier year-ago comparisons.
Moreover, Kraft is still behind many peers on advertising and promotional spending which has been affecting its sales performance. Accordingly, the company is boosting advertising investments which, in turn, is putting pressure on margins.
Earnings Whispers?
Our proven model does not conclusively show that Kraft is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP(Expected Surprise Prediction) 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 0.00%.
Zacks Rank: Kraft’s Zacks Rank #2 (Buy) when combined with a 0.00% 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:
ConAgra Foods, Inc. (CAG), withEarnings ESP of +1.54% and a Zacks Rank #2.
PepsiCo, Inc. (PEP), with Earnings ESP of +1.98% 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