Avis Budget Group, Inc. (CAR), leading car rental company, is slated to report its third-quarter 2014 results on Oct 29, after the closing bell. In the last quarter, the company had delivered a positive earnings surprise of 7.94%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Avis Budget has been delivering strong financial results over the last three quarters on the back of solid volume growth and improved pricing for both leisure and commercial travels in North America.
Although the company’s prudent technological investments are expected to enhance customer base and profitability, it has been facing downward estimate revisions since its Chief Financial Officer revealed that it would be a challenge for the company to achieve the higher end of its fiscal 2014 Earnings before Interest, Taxes, Depreciation and Amortization guidance range. This is because of the sluggishness being witnessed in the European markets. Moreover, the higher-than-expected fleet costs are likely to curb margins.
Earnings Whispers?
Our proven model does not conclusively show that Avis Budget 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, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -1.67%. This is because the Most Accurate estimate of $1.77 stands below the Zacks Consensus Estimate of $1.80.
Zacks Rank: Avis Budget’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 this quarter:
Best Buy Co., Inc. (BBY) has an Earnings ESP of +4.17% and a Zacks Rank #2 (Buy).
The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #2.
L Brands, Inc. (LB) has an Earnings ESP of +3.13% and a Zacks Rank #2.
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