Kraft Foods Group Inc. (KRFT) is set to report FQ4 2013 earnings after the market closes on Thursday, February 13th. Kraft is an American food manufacturing and processing company based outside Chicago. In the past 3 quarters, Kraft has beaten Wall Street expectations on profit each time; however, revenue has been sluggish in 2 of the 3 quarters. This quarter Wall Street is expecting a subdued growth of 3% in revenue and 7% in earnings per share compared to FQ4 last year. While Wall Street's growth estimates for Kraft are modest, this quarter investors have set the bar significantly higher.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for KRFT to report 61c EPS and $4.650B revenue while the current Estimize.com consensus from Buy Side and Independent contributing analysts is 64c EPS and $4.657B revenue. This quarter, the buy-side, as represented by the Estimize.com community, is expecting KRFT to beat Wall Street's expectations on both EPS and revenue.
Throughout the previous 4 quarters for which there is data, the consensus from Estimize.com has been more accurate than Wall Street in forecasting Kraft's EPS 3 times but has struggled to be more accurate than the Street on revenue. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a larger differential than usual for KRFT.
The distribution of estimates published by analysts on the Estimize.com platform range from 62c to 70c EPS and $4.628B to $4.700B in revenues. This quarter, we're seeing a larger distribution of estimates for KRFT on EPS and a smaller distribution on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates, signaling less agreement in the market, could mean greater volatility post earnings.
Throughout the quarter, the EPS consensus from Wall Street increased from 59c to 61c while the Estimize EPS consensus shot up from 61c to 64c. Over the same time period, Wall Street lowered its revenue expectation from $4.715B to $4.650B, while the Estimize consensus dropped from $4.680B to $4.657B. Timeliness is correlated with accuracy and falling analyst revisions at the end of a period are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is Gordon, who projects 63c EPS and $4.700B in revenue. In the Winter 2014 season, Gordon is rated as the 116th best analyst and is ranked 58th overall among over 3,850 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, Gordon is expecting Kraft Foods Group to beat expectations on revenue but come up short of the Estimize EPS consensus.
This quarter, Wall Street is expecting Kraft to report modest growth compared to last year. However, while Wall Street is expecting a 7% growth in EPS compared to last year, contributing analysts on the Estimize.com platform are expecting a 12% increase. While its profit expectation is higher than Wall Street's, the Estimize community is not expecting Kraft to report much more revenue than the Street has predicted.
Disclosure: No positions.