Lumber Liquidators Holdings, Inc. LL is set to report its second-quarter 2015 results on Aug 5 before the market opens. Last quarter, it posted a negative surprise of 293.3%. Let us see how things are developing prior to this announcement.
Factors Influencing this Quarter
Lumber Liquidators has been fishing in troubled waters since a report aired on 60 Minutes (a newsmagazine television program) on Mar 1, accused the company of selling Chinese flooring laminates containing formaldehyde levels that do not meet California emissions standards.
In an effort to free itself from the above mentioned allegation, the company decided to stop selling these floor laminates in June. Moreover, to add to the woes, the company’s CEO Robert. M. Lynch unexpectedly quit, without any explanation, in May.
The controversy could not have come at a worst time for Lumber Liquidators. The company’s performance over the last four quarters is nothing short of dismal with the results missing the Zacks Consensus Estimate in the trailing four quarters by an average of 80.6%.
However, the company is trying to improve its reputation and has started a free air quality test for its customers. Nevertheless, regaining customer confidence will be a time-consuming affair.
Earnings Whispers
Our proven model does not conclusively show that Lumber Liquidators is likely to beat earnings 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: Lumber Liquidators currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 7 cents per share.
Zacks Rank: Lumber Liquidators carries a Zacks Rank #4 (Sell). 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 other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Jack in the Box Inc. JACK has an Earnings ESP of +2.74% and a Zacks Rank #1 (Strong Buy).
The Walt Disney Company DIS has an Earnings ESP of +2.16% and a Zacks Rank #3 (Hold).
Coach, Inc. COH has an Earnings ESP of +3.45% and a Zacks Rank #3.
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