The earnings cycle is back in focus, and the prospects of food companies appear decently placed. Companies have been benefiting from favorable demand and strong pricing action measures amid an inflationary cost environment.
Incidentally, food companies have been grappling with the increased cost of ingredients, packaging and transportation, largely stemming from a disrupted supply-chain network. The increased labor cost has also been a concern for some companies. However, players have been raising product prices and undertaking strong saving and restructuring measures to combat these challenges. This is likely to have aided companies’ performances.
Apart from pricing, companies are gaining from relatively better volumes, which result from favorable demand.
As the pandemic has made society even more aware of the importance of consuming healthy and nutritious food by cooking at home, the demand for organic and fresh food products has been high, acting as an upside for players in the food product industry. Increased at-home consumption has also been working well for companies offering packaged food and snacks, ready-to-cook meals, meat-based food offerings, and confectionery and bakery items.
Companies have been making the most of the rising demand through constant brand-building efforts, including consumer-centric innovation and acquisitions. Firms have been particularly investing in healthy offerings, given consumers’ rising inclination toward health and wellness.
All said, let’s take a look at a few companies from the food space, which are likely to post an earnings beat in this reporting cycle.
How to Make the Right Choice?
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of an earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Per the latest Zacks Earnings Outlook, the Consumer Staples sector (which houses food stocks) is likely to witness a top-line increase of 3.3%, whereas the bottom line is expected to decrease 8.1% this earnings season.
4 Prominent Picks
Mondelez International, Inc. MDLZ is likely to register top-line growth when it reports first-quarter 2023 results. This snack food and beverage product company has an Earnings ESP of +1.06% and a Zacks Rank #3. The Zacks Consensus Estimate for Mondelez’s bottom line has remained unchanged at 80 cents in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
MDLZ has a trailing four-quarter earnings surprise of 7.5%, on average. The company has been gaining from strength in emerging markets and its core chocolate and biscuit categories. It has also been focused on strengthening areas with higher growth potential via prudent buyouts (like Clif Bar and Ricolino) and divestitures (like the developed market gum business). These upsides, together with pricing actions, bode well. Mondelez is set to report results on Apr 27.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. price-consensus-eps-surprise-chart | Mondelez International, Inc. Quote
The Hershey Company HSY also deserves a mention. The stock has an Earnings ESP of +0.47% and a Zacks Rank #3. The Zacks Consensus Estimate for Hershey’s first-quarter 2023 earnings per share has gone up by a penny over the past seven days to $2.67. This confectionery product and pantry item company has a trailing four-quarter earnings surprise of 11.3%, on average.
Hershey continues to gain from its prudent buyouts, which have been strengthening its portfolio. Solid pricing has also been an upside. Management remains optimistic about delivering earnings and sales growth in 2023. Management expects sales and gross margin growth to outpace higher brand, capability and technology investments, along with escalated pension and interest costs. HSY is slated to release results on Apr 27.
Hershey Company (The) Price, Consensus and EPS Surprise
Hershey Company (The) price-consensus-eps-surprise-chart | Hershey Company (The) Quote
The Kraft Heinz Company KHC is likely to register top-line growth when it reports first-quarter 2023 results. This manufacturer and marketer of food and beverage products has an Earnings ESP of +1.32% and a Zacks Rank #3. The Zacks Consensus Estimate for The Kraft Heinz’s bottom line has remained unchanged at 60 cents in the past 30 days.
KHC has a trailing four-quarter earnings surprise of 11.2%, on average. The company has been benefiting from its robust pricing actions. A focus on the operating model is also working well for The Kraft Heinz. The model incorporates five key elements, which include People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. The Kraft Heinz Company is scheduled to report results on May 3.
Kraft Heinz Company Price, Consensus and EPS Surprise
Kraft Heinz Company price-consensus-eps-surprise-chart | Kraft Heinz Company Quote
Kellogg Company K, with an Earnings ESP of +0.11% and a Zacks Rank #3, is worth a look. The Zacks Consensus Estimate for its first-quarter 2023 earnings is pegged at $1.00. The consensus mark for Kellogg’s bottom line has remained unchanged in the past 30 days. This snacks and convenience food company has a trailing four-quarter earnings surprise of 12.3%, on average.
The company, which is scheduled to report results on May 4, has been gaining from its Deploy for Growth Strategy. On its fourth-quarter 2022 earnings call, K stated that it expects price realization, momentum in its categories and solid brand plans to contribute to net sales growth in 2023.
Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote
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