The Q1 earnings season has so far been better than expected with many companies reporting positive earnings as well as sales surprises. According to an earnings preview report, total earnings for the 310 S&P 500 members that have reported results are down 7.2% from the year-ago period due to 2.4% lower revenues. Nonetheless, 71.9% of the companies that have released their Q1 results have beaten earnings estimates and 57.1% have surpassed top-line expectations.
Last week was more or less a good one for the food companies.
Among the food behemoths that reported last week, global snacking powerhouse – Mondelez International, Inc. MDLZ – beat the Zacks Consensus Estimate for both earnings and revenues despite rising currency headwinds and other global pressures. The Hershey Company HSY also beat the Zacks Consensus Estimate for earnings but missed the same for revenues.
Soft global retail and consumer demand amid increasing consumer inclination toward healthier and simpler food limited top-line growth for the companies. Moreover, weakening international currencies and economic slowdown in many emerging countries hurt international sales and profits.
Smaller companies like B&G Foods, Inc. BGS and Pinnacle Foods, Inc. PF also reported their results last week. While B&G Foods beat the Zacks Consensus Estimate for both earnings and revenues, Pinnacle Foods delivered in-line earnings with sales falling short of estimates. A couple of recent acquisitions resulted in positive year over sales growth at both the companies.
Supply chain productivity gains and lower overhead costs boosted profits at most of these food companies.
Three food companies, Kellogg Company K, The Kraft Heinz Company KHC, and Archer-Daniels-Midland Company ADM are set to report their quarterly results this week. Will these food companies put up a decent performance as well? Let’s have a look at what might be in store for them.
The Kraft Heinz Company
The Pittsburgh, PA-based consumer packaged food and beverage company will report Q1 results on May 4, after the market closes. Last quarter, the company delivered a positive earnings surprise of 6.90%. Despite lackluster sales figures, the packaged food company delivered positive earnings surprises in three of the past four quarters with an average surprise of 1.08%.
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For Q1, the company has an Earnings ESP of 1.64% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 61 cents.
Despite Kraft Heinz’ relatively soft sales, cost savings have led to better margins, mainly in the developed markets of the U.S. and Europe. We expect the trend to continue in Q1.(Read more: Kraft Heinz Likely to Top Q1 Earnings: Will Stock Gain?)
Kellogg Company
The Battle Creek, MI-based company is set to report Q1 results on May 5, before the market opens. Last quarter, the company delivered a positive earnings surprise of 5.33%. Notably, the cereal and snacks company delivered positive earnings surprises in each of the past four quarters with an average surprise of 3.84%.
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The company has an Earnings ESP of -2.15% and a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for the quarter is pegged at 93 cents per share.
After struggling for two years, Kellogg witnessed better-than-expected sales trends in 2015, especially in the U.S. cereal businesses. Moreover, improved organic sales growth and strong Project K cost savings boosted margins despite higher investments in food and brand building. We expect these positive trends to continue in Q1. However, the U.S. snacks business will remain a drag which, coupled with currency headwinds, will limit revenue growth to some extent. (Read more: Will Q1 Earnings Hold a Surprise for Kellogg Stock?)
Archer-Daniels-Midland Company
Archer Daniels is slated to report Q1 results on May 3, before the opening bell. In the last quarter, the agricultural company posted a negative earnings surprise of 6.15%. In fact, Archer Daniels missed the Zacks Consensus Estimate by an average of 5.22% over the past four quarters.
For Q1, the company has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell). The Zacks Consensus Estimate for the quarter is pegged at 43 cents.
Archer Daniels has been reporting weak sales figures over the past many quarters due to adverse market conditions and ongoing currency headwinds. Soft sales and weak margins have been hurting earnings as well. We do not expect any significant improvement in Q1. (Read more: Will Archer Daniels Q1 Earnings Weigh on the Stock?)
Don’t miss out on our full earnings release articles for these stocks, as the actual results might hold some surprises!
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