Louisiana-based swimming pool and lifestyle product maker Pool Corp. (POOL) is set to report second-quarter 2014 results on Jul 17, before the opening bell.
In the last quarter, the company missed the Zacks Consensus Estimate by 10.0%, primarily due to higher expenses. Let’s see how things are shaping up for the upcoming announcement.
Factors to Consider this Quarter
Pool Corp. has been affected for quite some time now by sluggish economic conditions and the stagnant U.S. swimming pool construction market. The weak housing market, which is affecting the company’s green business — construction and installation of new pools and landscaping — is also a concern. Rising interest rates and home prices, supply shortage and inclement weather have weakened net order trend in the housing market in the past 2-3 quarters compared with the first half of 2013 which in turn is hurting demand for Pool’s products and services.
We believe Pool is poised to benefit from the favorable weather trends in the second quarter. However, early cooling trends at the end of the year might negatively impact the company’s revenues.
Earnings Whispers?
Our proven model does not conclusively show that Pool is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Pool is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.62.
Zacks Rank: Pool has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the broader consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Brinker International, Inc. (EAT), with an Earnings ESP of +1.15% and a Zacks Rank #1 (Strong Buy).
Chipotle Mexican Grill, Inc. (CMG), with an Earnings ESP of +2.30% and a Zacks Rank #2 (Buy).
Domino's Pizza, Inc. (DPZ), with an Earnings ESP of +1.54% and a Zacks Rank #2.
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