ConAgra Foods, Inc. CAG is scheduled to report fourth-quarter fiscal 2016 results before the opening bell on Jun 30, 2016.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
ConAgra intends to improve its profitability and shareholders’ value via better price/mix, lower costs, efficient marketing, greater investments toward innovation, as well as strategic business restructuring. The company also remains on track with its inorganic growth strategies. Such initiatives are expected to boost margins in the quarter to be reported.
We also expect the company’s debt burden in fiscal fourth-quarter to be lowered by the cash proceeds accrued from successful divestiture of Private Label and Spicetec Flavors & Seasonings business. Diluted earnings are expected in the range of $2.05–$2.07 per share in fiscal 2016.
However, ConAgra remains exposed to certain headwinds that might limit its top-line and bottom-line growth in the quarter under review. High volatility in consumers’ brand loyalty, lower wage growth and high income inequality in the U.S.; alongside lackluster economic performance in booming markets might hurt revenues and hence, margins, in quarter under review.
Stock Price Impact
At the last quarter earnings release ConAgra announced its decision to split its more profitable Commercial Foods segment and less profitable Consumer Foods segment into two separate public companies – ConAgra Brands and Lamb Weston – by the end of the fiscal year. Since the declaration, the company’s shared gained roughly 4% to $46.95 as of Jun 24, 2016. Also, the announcement of JW Swank business spin-off and Lamb Weston business expansion at Richland facility in Jun 8 drove the stock higher by roughly 0.4%. In addition, the proposed $6 billion Post Holdings, Inc. merger with ConAgra’s Lamb Weston business through a Reverse Morris Trust structure is expected to result in further stock price movement. Hence, it remains to be seen how ConAgra’s fiscal fourth-quarter results turn out and if the continuous attempts by the company to fortify its product portfolio benefits the stock in the near term!
Earnings Whispers
Our proven model does not conclusively show that ConAgra is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as we will see below.
Zacks ESP: ConAgra currently has an Earnings ESP of 0.00%. This is because both the Zacks Consensus Estimate and the Most Accurate estimate stand at of 52 cents.
Zacks Rank: ConAgra holds a Zacks Rank #2. However, a 0.00% ESP makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Intrawest Resorts Holdings, Inc. SNOW with an Earnings ESP of +1.44% and a Zacks Rank #1.
Carter's, Inc. CRI with an Earnings ESP of +4.62% and a Zacks Rank #2.
The Liberty Media Group LMCA with an Earnings ESP of +27.66% and a Zacks Rank #3.
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