Ascena Retail Group Inc. ASNA is set to report first-quarter fiscal 2016 results on Dec 1. Last quarter, it posted a positive earnings surprise of 20%. Let us see how things are shaping up for this announcement.
Factors Influencing this Quarter
Ascena has outperformed the Zacks Consensus Estimate by an average of 1.5% over the past four quarters. In the previous quarter, the company’s top line also exceeded expectations, as significant benefits from eCommerce growth more than offset the choppy performance of its physical stores. Further, Ascena recently closed the buyout of ANN INC. which is likely to boost its results by generating cost synergies and enhancing the bottom line. While these factors bode well for Ascena, persistent weakness at its Justice brand remains a concern for the company. This in turn makes us somewhat cautious of the upcoming results.
Earnings Whispers
Our proven model does not conclusively show that Ascena 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: Earnings ESP for Ascena is -3.45%. This is because the Most Accurate estimate of 28 cents stands below the Zacks Consensus Estimate of 29 cents.
Zacks Rank: Ascena’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 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
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:
CarMax Inc. KMX has an Earnings ESP of +1.45% and a Zacks Rank #2 (Buy).
Casey's General Stores Inc. CASY has an Earnings ESP of +12.50% and a Zacks Rank #2 (Buy).
Restoration Hardware Holdings Inc. RH has an Earnings ESP of +1.59% and a Zacks Rank #3.
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