The Hershey Company
) is set to report its first-quarter 2013 results on Apr 25
before the market opens. Last quarter it posted a 1.33% negative
surprise. Let's see how things are shaping up for this
Growth Factors this Past Quarter
We believe that the earnings miss in the quarter was due to
operating margin declines and rising advertising expenses.
Earnings however, rose more than 5% year over year.
Revenues grew year-over-year and also beat the Zacks Consensus
Estimate driven by improving volume trends of core brands in the
U.S. on the back of increased advertising investments and
consumer promotions and innovation. Pricing as well as the Jan
2012 acquisition of Canadian confectionary company, Brookside
Foods, also benefited revenues. Operating margin however,
suffered due to higher advertising and selling, marketing and
Our proven model does not conclusively show that Hershey is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here, as you will see below.
Negative Zacks ESP:
The Earnings ESP is -1.92%.
Hershey's Zacks Rank #3 (Hold) lowers the predictive power
of ESP because the Zacks Rank #3 when combined with a negative
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.
The first quarter revenues are expected to face strong
year-ago comparisons due to a shorter Easter season in 2013 in
the U.S. versus last year. Moreover, the company expects
operating margin to be pressured in the first half due to
increased marketing and promotional efforts and higher costs to
support the launch of Brookside branded and international new
Other Stocks to Consider
Here are some other consumer staples companies you may want to
consider, as our model shows they have the right combination of
elements to post an earnings beat this quarter:
Flower Foods Inc.
), with Earnings ESP of +4.88% and a Zacks Rank #1 (Strong
Kraft Foods Group, Inc.
), with Earnings ESP of +3.13% and a Zacks Rank #2 (Buy)
Church & Dwight Co. Inc.
), with Earnings ESP of +1.39% and a Zacks Rank #3 (Hold)
CHURCH & DWIGHT (CHD): Free Stock Analysis
FLOWERS FOODS (FLO): Free Stock Analysis
HERSHEY CO/THE (HSY): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
To read this article on Zacks.com click here.