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What's in the Cards for Castle Brands (ROX) in Q3 Earnings?

Zacks Equity Research

Castle Brands Inc. ROX is expected to report third-quarter fiscal 2018 results on Feb 8. Last quarter, the company reported in-line results.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Growth in the company’s leading brands — Jefferson's, Irish whiskeys and Goslings Stormy Ginger Beer — has resulted in solid revenue and gross profit growth. Investment in aging and new-fill bourbon supports rapid growth of its super premium small-batch Jefferson's bourbons.

Castle Brands acquired an additional 5% stake in Copperhead Distillery Company, the owner of the Kentucky Artisan Distillery, in October 2017. With this, Castle Brands has increased its stake in Copperhead Distillery Company to 25%. The move followed the completion of an initial 20% purchase in 2015.

The combination of its new fill whiskey program with opportunistic buyouts of aged whiskies enables it to create substantial reserves of aged bourbon to support strong demand of its Jefferson's brand.

For the six months ended Sep 30, 2017, Castle Brands net sales increased 14.8% year over year, driven by solid improvement in Jefferson's bourbons and Goslings Stormy Ginger Beer. This solid momentum is expected to continue in the third quarter. Notably, the Zacks Consensus Estimate for revenues is pegged at $20.4 million, implying an 11.5% increase.

Earnings Whisper

Our proven model does not conclusively show that Castle Brands is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP:  Castle Brands has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at a breakeven. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Castle Brands has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Castle Brands, Inc. Price and EPS Surprise


Castle Brands, Inc. Price and EPS Surprise | Castle Brands, Inc. Quote


Stocks to Consider

Here are a few consumer staples stocks that you may consider, as they have the right combination of elements to post an earnings beat this quarter.

United Natural Foods UNFI has an Earnings ESP of +5.67% and a Zacks Rank #2.

Coca-Cola European Partners CCE has an Earnings ESP of +1.28% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Post Holdings POST has an Earnings ESP of +1.06% and a Zacks Rank #3.

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