Overstock.com Inc. (OSTK) is slated to report fourth-quarter 2014 results after the closing bell on Jan 29. Last quarter, the company posted a positive earnings surprise of 16.67%. Let us see how things are shaping up for this announcement.
Factors to Consider
Overstock’s third-quarter 2014 earnings of 7 cents beat the Zacks Consensus Estimate of 6 cents. Revenues of $353 million also came ahead of the consensus mark of $334 million.
Fourth quarter results could see a boost from Overstock's liquidation of its Bidz.com jewelry haul. Hailed as the company’s largest liquidation to date, Overstock valued the items at $89 million. Sale of these items at even half the retail price could add $44.5 million to the top line for the fourth quarter.
The company has come out with quite a lot of programs to boost sales, including a price war with Amazon.com (AMZN) and a new affiliation with PBS kids.
In November last year, Overstock’s Farmer market initiative was rolled out. It was aimed at bridging the gap from farm to table. The company revealed that it was bringing together small farms, community-supported agriculture and co-ops with its technology. Overstock will play the roll of a middle man and believes that it can serve 20% of the U.S. population with farm fresh food.
Overstock Club O loyalty program, which costs customers $19.95 a year, comes with free shipping and a generous rewards payout of 5% to 25% on all items purchased. That along with a new branded credit card should help boost loyalty to the site and encourage repeat purchases.
Overstock has been accepting bitcoin as payment for a year now. Customers have made $3 million worth of purchases with bitcoin so far. Recently, there were reports that it is planning to offer its employees the option of being paid in bitcoin.
With a strong business model and a growing customer base, Overstock should benefit from the shifting demand to purchase gifts and other items online.
Earnings Whispers?
Our proven model does not conclusively show that Overstock will beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Ranks #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 25 cents. Hence, the difference is 0.00%.
Zacks Rank: Overstock currently carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% 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.
Other Stocks to Consider
Here are some other companies you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Ellie Mae, Inc. (ELLI) has an Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy).
Cognizant Technology Solutions Corp. (CTSH) with an Earnings ESP of +1.69% and a Zacks Rank #2 (Buy).
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