The earnings growth scenario in Q3 is pretty clear as we step into the second half of the reporting cycle. Also, the quarter has been persistently heading toward an improvement after five straight quarters of earnings decline. This period is a significant one with both earnings and revenues on the growth trajectory.
Per our Earnings Preview report as of Oct 28, out of the 291 S&P 500 companies that have come up with their quarterly numbers, approximately 73.5% posted positive earnings surprises, while 57.4% beat top-line expectations. According to the report, earnings for the 291 S&P 500 companies that have reported so far are up 2.2% from the same period last year, while revenues have increased 1.3%.
Further, the report projects that earnings for the total S&P 500 companies will improve 2% from the year-ago period with total revenue rising 1.4%. In Q2, earnings for the S&P 500 companies declined 2.8%, whereas revenues were flat.
The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, four are expected to witness an earnings decline in the third quarter, with Auto, Oil/Energy and Transportation being a major drag. However, the Consumer Staples sector (that houses food and agriculture stocks, among others) is witnessing an improvement despite overseas turmoil, fluctuating commodity prices and the Fed's pending decision over the rate hike.
Total earnings for the Consumer Staples sector are estimated to rise 5.4%, whereas revenues are projected to increase 1.1%.
So, let's see what awaits the following Consumer Staples stocks that are queued up for third-quarter 2016 earnings releases on Nov 1.
To start with Archer-Daniels-Midland CompanyADM , we are unsure whether this leading food processing company will be able to post a positive earnings surprise in the quarter to be reported. The company carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, its Earnings ESP of 0.00% makes surprise prediction difficult. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Moreover, in the trailing four quarters, the company missed the Zacks Consensus Estimate by an average of 7.7%.
ARCHER DANIELS Price and EPS Surprise
Archer Daniels remains focused on enhancing its processing capabilities and global footprint through strategic acquisitions and divestitures. However, the first half of the year proved challenging for the company due to lingering adverse market conditions and weak margins across various industries. Also, we note that the Zacks Consensus Estimate of 47 cents for third-quarter 2016 has declined 7 cents over the past 30 days. (Read: Can Archer Daniels Pull a Surprise in Q3 Earnings? )
Next, let's take a sneak peek at another agricultural stock, Fresh Del Monte Produce Inc.FDP . Our proven model does not conclusively show that this producer and distributor of high-quality fresh produce is likely to beat earnings estimates this quarter. This is because it has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Although the company's Zacks Rank #3 increases the predictive power of ESP, its ESP of 0.00% makes surprise prediction difficult.
FRESH DEL MONTE Price and EPS Surprise
The Zacks Consensus Estimate for the quarter currently stands at 54 cents. In the trailing four quarters, the company lagged the Zacks Consensus Estimate by an average of 63.2%.
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