Bed Bath & Beyond Inc. (BBBY), a specialty retailer that offers domestic merchandise and home furnishings, is slated to report its third-quarter fiscal 2014 results on Jan 8, 2015. In the last quarter, the company had posted a positive surprise of 2.63%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Bed Bath & Beyond’s strategic initiatives, including store expansion, enhancement of e-commerce capabilities and improvisation of customer services have started showing results as evident from its second-quarter fiscal 2014 results. Further, looking at the improving housing market, we expect the company’s sales to grow at an impressive pace.
However, we remain concerned about the rising coupon costs, higher direct-to-customer shipping expense and mix shift to products sold in lower-margin categories. These headwinds are expected to linger, going forward and may impact results. Hence, we remain cautious of the upcoming results.
However, management envisions sales to increase in the range of 2.8%–3.7% and consequently projects earnings in the range of $1.17–$1.21 per share for the third quarter of fiscal 2014.
Earnings Whispers?
Our proven model does not conclusively show that Bed Bath & Beyond is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.19.
Zacks Rank: Bed Bath & Beyond carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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:
Pacific Sunwear of California Inc. (PSUN) has an Earnings ESP of +7.69% and a Zacks Rank #1 (Strong Buy).
PetSmart, Inc. (PETM) has an Earnings ESP of +0.73% and a Zacks Rank #1.
L Brands, Inc. (LB) has an Earnings ESP of +1.72% and a Zacks Rank #2 (Buy).
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