We expect Zumiez Inc. (ZUMZ), a Wash.-based retailer of sports-related teen apparel, to beat expectations when it reports second-quarter fiscal 2013 results on Sep 5. In the past quarter, it posted a positive surprise of approximately 8.3% and we believe that the company will beat expectations for this quarter as well.
Why a Likely Positive Surprise?
Our proven model shows that Zumiez may beat earnings because it has the right combination of 2 key components.
Positive Zacks ESP: Zumiez currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +5.88%. This is because the Most Accurate Estimate stands at 18 cents per share, while the Zacks Consensus Estimate is pegged at 17 cents.
Zacks #3 Rank (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have higher chances of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Zumiez’s Zacks Rank #3 (Hold) and Earnings ESP of +5.88% makes us confident of a positive earnings beat on Sep 5.
What is Driving Better-than-Expected Earnings?
Zumiez’s strategy relies on offering action-sports merchandise focused on young men and women in the age of group of 12–24, which has enabled the company to carve a distinct niche for itself. Furthermore, the company’s stores are strategically located in busy areas of the mall, such as food courts, movie theatres and music/game stores, which are frequently visited by its target customers. We also believe that Zumiez’s initiatives such as store opening programs and the acquisition of Blue Tomato has provided it a solid platform to capitalize on the emerging opportunities.
The company has surpassed the Zacks Consensus Estimate in the trailing 4 quarters with an average surprise of approximately 12.6%.
Other Stocks to Consider
Zumiez is not the only firm we are looking up to this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:
Buckle Inc. (BKE) with an Earnings ESP of +2.20% and a Zacks Rank #2 (Buy).
Dollar General Corp. (DG) with Earnings ESP of +1.35% and a Zacks Rank #2 (Buy).
Dollar Tree Inc. (DLTR) has an Earnings ESP of +1.70% and a Zacks Rank #3 (Hold).
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