We expect the Washington-based retailer of sports-related teen apparel Zumiez Inc. (ZUMZ) to beat expectations when it reports third-quarter 2014 results on Dec 4.
Why a Likely Positive Surprise?
Our proven model shows that Zumiez may beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Zumiez currently has an Earnings ESP of +3.85%. This is because the Most Accurate estimate stands at 54 cents per share, while the Zacks Consensus Estimate is pegged at 52 cents.
Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance 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 #2 and Earnings ESP of +3.85% makes us confident of a positive earnings beat.
What is Driving Better-than-Expected Earnings?
Zumiez Inc. is a mall-based specialty retailer of action-sports related apparel, footwear, equipment and accessories. The company's strategy of offering action sports merchandise focused on young adults, both men and women aged 12 to 24 years, has enabled it to carve a distinct niche for itself.
Zumiez posted better-than-expected second-quarter fiscal 2014 earnings driven by strong top-line performance due to improved comparable-store sales led by its ability to attract customers with an exclusive collection. Following the strong results, the company expects third-quarter revenue in the range of $207–$211 million, while comps are expected to be in the low single-digits range.
Based on sales projections for the quarter, the company formulated a bottom-line guidance of 47 cents to 50 cents per share, including estimated charges of 2 cents per share related to the Blue Tomato acquisition.
Zumiez has topped the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 30.99%. In the last concluded quarter, the company posted an earnings surprise of 17.4%.
We expect the company to keep up this trend of posting positive earnings surprises in the years ahead based on its focus on boosting productivity at existing stores, developing a leading omni-channel platform and enhancing its presence both domestically and overseas.
Other Stocks to Consider
Zumiez is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:
Casey's General Stores, Inc. (CASY) has an Earnings ESP of +6.25% and a Zacks Rank #2.
Costco Wholesale Corporation (COST) has an Earnings ESP of +0.93% and a Zacks Rank #3 (Hold).
Kroger Co.’s (KR) Earnings ESP stands at +3.28% and it carries a Zacks Rank #3.
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