We expect Lowe's Companies Inc. (LOW) to beat expectations when it reports third-quarter fiscal 2014 results on Nov 19. In the last quarter, it had delivered a positive earnings surprise of 2%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Lowe's is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Lowe's has the right combination of these two key components.
Zacks ESP: Lowe's currently has an Earnings ESP of +3.45%. This is because the Most Accurate estimate stands at 60 cents, while the Zacks Consensus Estimate is pegged at 58 cents.
Zacks Rank: Lowe's carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
Lowe's Zacks Rank #3 and ESP of +3.45% make us reasonably confident of a positive earnings beat.
What's Driving the Better-than-Expected Earnings?
Spending on home improvement, especially remodeling and big ticket items, has shown much improvement over the last few months thereby providing an impetus to Lowe’s sales. After a better-than-expected second quarter, we expect the company to top estimates this quarter on the back of its extensive merchandising initiatives.
Stocks That Warrant a Look
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
Best Buy Co., Inc. (BBY) has an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).
The Michaels Companies, Inc. (MIK) has an Earnings ESP of +3.85% and a Zacks Rank #2 (Buy).
GameStop Corp. (GME) has an Earnings ESP of +1.61% and a Zacks Rank #3.
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