PetSmart Inc. PETM is slated to report fourth-quarter fiscal 2014 results on Mar 4. In the previous quarter, PetSmart recorded a positive earnings surprise of nearly 7.4%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that PetSmart 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. PetSmart has the right combination of these two key components.
Zacks ESP: PetSmart currently has an Earnings ESP of +1.46%. This is because the Most Accurate estimate stands at $1.39, while the Zacks Consensus Estimate is pegged at $1.37.
Zacks Rank: PetSmart’s carries a Zacks Rank #2 (Buy), which enhances the possibility of an earnings surprise. Conversely, Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
PetSmart’s Zacks Rank #2 and ESP of +1.46% make us reasonably confident of a positive earnings beat.
What's Driving the Better-than-Expected Earnings?
To battle falling revenues and shrinking margins, PetSmart has undertaken various performance-improvement initiatives. These initiatives include cost savings, widening product range, developing its omni-channel network and enhancing customer experience. The company has also acquired Pet360 to tap online sales and emerge as a leader in the online retail market. All these factors have started to act in favor of the retailer. Moreover, the company posted a good preliminary holiday sales report. Going by the holiday numbers, the company expects to post adjusted earnings either in line or exceeding analysts’ expectations in the fourth quarter.
In the trailing four quarters, the company has posted an average positive earnings surprise of 4.9%.
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:
The Kroger Co. KR has an Earnings ESP of +6.74% and a Zacks Rank #2.
ULTA Salon, Cosmetics & Fragrance, Inc. ULTA has an Earnings ESP of +0.79% and a Zacks Rank #2.
Zumiez, Inc. ZUMZ has an Earnings ESP of +1.27% and a Zacks Rank #2.
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