Family Dollar Stores Inc. FDO, the operator of self-service retail discount store chains, is slated to report its second-quarter fiscal 2015 results on Apr 8. In the last quarter, it had posted a negative surprise of 25.4%. Let’s see how things are shaping up for this announcement.
Factors Affecting This Quarter
Family Dollar has been in troubled waters for some time now. Heightened competition from other big brick and mortar retailers as well as online giants has affected the company’s sales and profitability. Moreover, management expects margins to remain under pressure given increases in the sale of low-margin consumables and soft sales of discretionary products. Thus, we remain skeptical about the company’s upcoming quarterly results.
Earnings Whispers?
Our proven model does not conclusively show that Family Dollar 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: Family Dollar has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 72 cents.
Zacks Rank: Family Dollar’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
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 to post an earnings beat:
Walgreens Boots Alliance Inc. WBA has an Earnings ESP of +1.06% and a Zacks Rank #3.
Bed Bath & Beyond Inc. BBBY has an Earnings ESP of +2.76% and a Zacks Rank #3.
CarMax Inc. KMX Earnings ESP stands at +1.21% and carries a Zacks Rank #3.
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