Keurig Green Mountain Inc. GMCR is set to report second-quarter fiscal 2015 results on May 6. Last quarter, the company delivered a negative earnings surprise of 1.12%.
However, the company has delivered an average positive earnings surprise of 10.43% over the trailing four quarters backed by solid top-line improvement and operational efficiencies.
Let's see how things are shaping up for the upcoming announcement.
Factors to Consider
The coffee maker entered into several strategic alliances during the second quarter to maintain its leading position in the single-serve brewing category which should drive results. These deals include a manufacture and distribution deal with Dr Pepper Snapple DPS, and the renewal of its multi-year partnership with Dunkin' Brands Group, Inc. DNKN and The J.M. Smucker Company SJM.
Keurig Green Mountain also signed a multi-year manufacturing and distribution agreement with Reily Foods any under which Keurig will make New England branded coffee, New Orleans Famous French Market branded coffee and Luzianne branded iced tea pods available for Keurig brewers.
However, the company has been witnessing lower sales in the portion pack category over the past few months. Additionally, higher coffee costs lately have prompted it to raise the prices which can hurt volumes in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Keurig Green Mountain is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:
Zacks ESP: ESP for Keurig Green Mountain is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.05.
Zacks Rank:Keurig Green has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.
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 momentum.
Stocks to Consider
Here are some consumer staples companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Treehouse Foods Inc. THS), with an Earnings ESP of +1.72% and a Zacks Rank #3.
Post Holdings Corp. (POST), with an Earnings ESP of +54.55% and a Zacks Rank #3.
Constellation Brands STZ), with an Earnings ESP of +0.82% and a Zacks Rank #3.
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