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What's in Store for Companhia Brasileira's (CBD) Q2 Earnings?

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What's in Store for Companhia Brasileira's (CBD) Q2 Earnings?

We expect Companhia Brasileira (CBD) to continue gaining from strength at Assai and Multivarejo divisions. However, transportation hurdles pose threats.

Companhia Brasileira de Distribuicao CBD or Grupo Pao de Acucar is scheduled to release second-quarter 2018 results on Jul 24. We expect the company to keep gaining from continued strength at its Assai division and faster growth at Multivarejo. However, food deflation has long been a challenge for the company and may impact results negatively in the quarter to be reported as well.

Companhia Brasileira de Distribuicao Price and EPS Surprise

Companhia Brasileira de Distribuicao Price and EPS Surprise | Companhia Brasileira de Distribuicao Quote

Companhia Brasileira, one of the leading traditional retailers in the Brazilian food space, has an impressive earnings surprise record. Let’s see what’s in store for the company this time around.

What to Expect?

The Zacks Consensus Estimate for Companhia Brasileira’s second-quarter earnings is pegged at 15 cents per share, down significantly from the year-ago period earnings of 45 cents. The estimate remained stable in the past 30 days.

Factors Impacting the Quarter

Companhia Brasileira recently came out with its sales results for the second quarter of 2018, wherein gross sales revenues surged 9.9% to R$12.8 billion (or nearly $3.6 billion). Results were driven by continued strength at Assai and faster growth at Multivarejo. The Zacks Consensus Estimate for sales is pegged at $3.1 billion. Further, the company’s same store sales jumped 5.1%, excluding calendar effect, courtesy of robust sales volume improvements witnessed across all channels.

Apart from this, the company remains on track with digital transformation, highlighting the success of its My Discount platform at Multivarejo. Focus on digital development remains a major priority for the company, which is likely to be a tailwind. Also, continued organic expansion, stores optimization and enhancements to retail format offerings bode well.

However, costs associated with store expansions or conversions may impact the bottom line, which also remains exposed to transportation headwinds due to truck divers’ strike. Also, food deflation in Brazil was a hurdle for Companhia Brasileira for quite some time, which may have an impact on the company’s second-quarter 2018 results as well.  

What Does the Zacks Model Unveil?

However, our proven model doesn’t show thatCompanhia Brasileira can beat bottom-line estimates this quarter. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Markedly, Companhia Brasileira’s Zacks Rank #4 (Sell) and Earnings ESP of +0.00% make us less confident of an earnings beat.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:

Michael Kors Holdings Limited KORS, a Zacks #3 Ranked stock, has an Earnings ESP of +0.87%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Guess?, Inc. GES, a Zacks #2 Ranked company, has an Earnings ESP of +4.08%.

Hershey HSY has an Earnings ESP of +0.26% and a Zacks Rank of 3.

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