The world's largest home improvement retailer,
Home Depot Inc.
) is set to report its fourth quarter 2012 results on Feb 26.
Last quarter it posted a positive surprise of approximately 5.7%.
Let's see how things are shaping up for this announcement.
Growth Factors in the Past Quarter
The company's improved customer transactions and average ticket
size resulted in robust top-line growth in the last-reported
quarter. Robust comparable store sales as well as operating
performance led to the growth in earnings, which surpassed
expectations. Moreover, better cost containment by shuttering
unproductive stores helped boost its operating margin.
Further, given the company's focus on revamping itself by
concentrating on square footage growth and maximization of
productivity from its existing store base, we believe that Home
Depot is well positioned to capitalize on available
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Our proven model does not conclusively show that Home Depot is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 or #3 for this to happen. This is not
the case here, owing to the following factors:
ESP for Home Depot is 0.00%. This is because the Most Accurate
Estimate stands at 64 cents, which is in line with the Zacks
Zacks #2 Rank (Buy):
Home Depot's Zacks Rank #2 (Buy) lowers the predictive power of
ESP because the Rank #2, when combined with a 0.00% ESP makes
surprise prediction difficult. We caution against stocks with
Zacks Ranks #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 you may want to consider as our
model shows that these have the right combination of elements to
post an earnings beat this quarter:
New York & Company Inc.
) with an Earnings ESP of +12.50% and a Zacks Rank #2 (Buy).
Abercrombie & Fitch Company
) with an Earnings ESP of +2.59% and a Zacks Rank #1 (Strong
Dollar Tree Inc.
) has an Earnings ESP of +1.01% and carries a Zacks Rank #3