Campbell Soup (CPB) is expected to post a year-over-year decline in earnings on higher revenue when it reports results for the quarter ending July 2023. This widely known consensus approach gives a good sense of a company’s earnings picture, but how actual results compare to these estimates is a powerful factor that can affect its near-term stock price.
If these key numbers in the upcoming earnings report, which is expected to be released on August 31, come in above expectations, the stock could go higher. On the other hand, if they miss, the stock may go down.
While the stability of the immediate price change and future earnings expectations will depend mostly on management’s discussion of business conditions on the earnings call, it’s worth downplaying the potential for a positive EPS surprise.
zacks consensus estimate
The maker of canned soups, Pepperidge Farm cookies and V8 juice is expected to report quarterly earnings of $0.50 per share in its upcoming report, representing a change of -10.7% year-over-year.
Revenue is expected to be $2.06 billion, up 3.5% from the year-ago quarter.
estimate revision trend
The consensus EPS estimate for the quarter has been revised upward by 0.44% over the current level over the last 30 days. This is essentially a reflection of how covering analysts have collectively re-evaluated their initial estimates during this period.
Investors should keep in mind that the overall change may not always reflect the direction of estimate revisions by each of the covering analysts.
earning whisper
Prior to a company’s earnings release, revisions to estimates indicate business conditions for the period for which results are being reported. This insight is at the core of our proprietary surprise forecasting model – Zack’s Earnings ESP (Expected Surprise Forecast).
Zacks Earnings ESP compares the best estimate for the quarter to the Zacks consensus estimate; The most accurate estimate is the latest version of the Zacks Consensus EPS estimate. The idea here is that analysts who revise their estimates just before an earnings release have the latest information, which can potentially be more accurate than what they and others contributing to the consensus may have previously thought. It was predicted.
Thus, a positive or negative earnings ESP reading theoretically indicates a possible deviation of actual earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP readings.
A positive earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination generate positive surprises about 70% of the time, and a solid Zacks Rank actually increases the predictive power of an earnings ESP.
Please note that a negative Earnings ESP reading does not necessarily indicate a decrease in earnings. Our research suggests that it is difficult to predict earnings declines with any level of confidence for stocks with negative Earnings ESP readings and/or Zacks Ranks of 4 (Sell) or 5 (Strong Sell).
How have the numbers shaped up for Campbell?
For Campbell, the most accurate estimate is lower than the Zacks consensus estimate, which suggests that analysts have recently turned bearish on the company’s earnings prospects. This results in an Earnings ESP of -0.60%.
On the other hand, the stock currently holds a Zacks rank of #3.
Therefore, this combination makes it difficult to conclusively predict whether Campbell will beat the consensus EPS estimate.
Does the history of earnings surprises hold any clues?
When calculating a company’s future earnings estimates, analysts often consider the extent to which it has been able to match past consensus estimates. Therefore, it is worth taking a look at the surprising history to assess its impact on the upcoming numbers.
For the last reported quarter, it was expected that Campbell would earn earnings per share of $0.64, while it actually earned earnings of $0.68, a surprise increase of +6.25%.
Over the past four quarters, the company has beaten consensus EPS estimates three times.
ground level
A fall or miss in earnings cannot be the sole basis for a stock to go up or down. Many stocks are falling despite the decline in earnings due to other factors discouraging investors. Similarly, unexpected catalysts help many stocks post gains despite declining earnings.
That said, the chances of success are increased by betting on stocks that are expected to outperform earnings expectations. This is why it is advisable to check a company’s earnings ESP and Zacks Rank before its quarterly releases. Be sure to use our Earnings ESP filters to uncover the best stocks to buy or sell before they report.
Campbell does not appear to be a strong candidate in terms of earnings. However, investors should also look at other factors to consider whether to bet on this stock or stay away from it before its earnings release.
Expected Outcomes of an Industry Player
Jax Foods – Another stock from Diversified Industry Smucker (SJM) is expected to report earnings per share of $2.07 for the quarter ending July 2023. This estimate points to a change of +24% year-on-year. Revenue for the quarter is expected to be $1.84 billion, down 1.7% from the year-ago quarter.
The consensus EPS estimate for Smucker’s has been revised higher by 0.2% over current levels over the last 30 days. However, the highest precision estimate resulted in an earning ESP of 0.24%.
This earnings ESP, combined with its Zacks Rank #2 (Buy), suggests Smucker will likely beat consensus EPS estimates. The company beat consensus EPS estimates in all four previous quarters.
Stay on top of upcoming earnings announcements with the Jax earnings calendar.
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