Will Inflation Hurt These 3 Food Companies Earnings?
With McDonald’s (NYSE:MCD) recently hitting a new 52-week high, and YUM! Brands (NYSE:YUM) receiving Chinese approval to buy Mongolian hot-pot seller Little Sheep Group, there is an increasing focus on consumer food companies. On Wednesday, several big food names report earnings.
Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) engages in the specialty coffee and coffee maker business. The company sources, produces, and sells approximately 200 varieties of coffee, cocoa, teas, and other beverages in K-Cup portion packs and coffee in traditional packaging. Shares took a nasty stumble after David Einhorn, the head of Greenlight Capital, gave a damaging presentation about the company. However, coffee prices have been declining, and competitor Starbucks (NASDAQ:SBUX) had a positive earnings release last week. Green Mountain has beaten estimates the last four quarters and is coming off a quarter where it topped forecasts by 13 cents, reporting net income of 49 cents per share against a mean estimate of profit of 36 cents per share. On average, analysts predict $760.5 million in revenue this quarter, a rise of more than twofold from the year ago quarter.
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In the past month, shares of Wendy’s (NYSE:WEN) have surged 18%. The company operates as a quick-service hamburger company in the United States. The company, through its subsidiary, Wendy’s International, Inc., operates as a franchisor of the Wendy’s restaurant system. The average estimate of analysts is for profit of 4 cents per share, a decline of 20% from the company’s actual earnings for the same quarter a year ago. All eyes will be on earnings Wednesday, as Wendy’s has missed estimates in the last two quarters. The company has been experimenting with new chicken sandwiches in order to fight rising commodity (NYSEARCA:RJI) prices. The WSJ reports, “Live cattle prices are up 13% this year in Chicago futures trading, making cattle among the few widely traded commodities besides gold (NYSEARCA:GLD) to be up by double digits. Lean hogs futures are up 9% this year. Both meat contracts also jumped in 2010, climbing 26% and 22%, respectively.”
Dean Foods (NYSE:DF) is another food and beverage company that stands to lose a lot from a disappointing earnings release on Wednesday. Shares have increased by 25% in the past three months. The average estimate of analysts is for profit of 15 cents per share, a rise of 15.4% from the company’s actual earnings for the same quarter a year ago. The company’s quarterly results have come in above estimates for the last three quarters. The nation’s largest dairy producer announced in April that it would be cutting more than 1,400 jobs due to rising costs.
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Food Companies to Watch: Peet’s Coffee & Tea, Inc. (NASDAQ:PEET), Coffee Holding Co., Inc. (NASDAQ:JVA), Starbucks Corporation (NASDAQ:SBUX), The J.M. Smucker Company (NYSE:SJM), Sara Lee Corp. (NYSE:SLE), Dunkin Brands (NASDAQ:DNKN) and Kraft Foods Inc. (NYSE:KFT).