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Will Ingredion Continue Positive Earnings Growth in 2Q16?

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Fiscal 2Q16 EPS estimates

Analysts are expecting Ingredion’s (INGR) adjusted EPS (earnings per share) for 2Q16 to be $1.65 compared to $1.53 in 2Q15. That’s an increase of 8%.

In the graph below, you can see that the company has beaten analyst expectations in all four quarters of fiscal 2015 and the first quarter of 2016 by a huge margin. Looking at this trend, we can expect INGR’s earnings to beat estimates in 2Q16.

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Outlook for 2016

Ingredion announced its raised guidance for fiscal 2016 in its first quarter earnings release. The company now expects the year’s EPS to be $6.45–$6.75. That means it expects EPS to increase 9%–15%. This estimate excludes acquisition-related and restructuring costs.

The following factors are supposed to affect INGR’s 2016 EPS:

  • anticipated currency headwinds of $0.30–$0.40
  • higher financing costs
  • annual tax rate of 30%–32%
  • slight rise in corporate expenses

Analysts also expect earnings to increase 7% and 10% in 3Q16 and 4Q16, respectively. That would make earnings growth 14% for fiscal 2016.

Earnings estimates for peers

Ingredion’s major peers in the packaged food industry include Archer-Daniels Midland (ADM), Bunge (BG), and ConAgra Foods (CAG).

  • Archer-Daniels Midland expects EPS for its fiscal 2Q16 to fall by 24%.
  • Bunge expects EPS for its fiscal 2Q16 to fall by 23%.
  • ConAgra expects EPS for its fiscal 1Q17 to rise by 7%.

To gain exposure to BG, you might consider investing in the Vanguard Consumer Staples ETF (VDC) and the iShares MSCI USA ESG Select (KLD), which invest 1.3% in Bunge.

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