Last time, we discussed
3 Retail Stocks to Power Your Portfolio
, particularly in an unfavorable economy when the market mood
wavers. But is it enough to look for a favorably ranked stock while
picking a market winner?
To an extent, yes. But if the stock is powered by an optimism
that the company will beat the earnings estimate in the upcoming
quarter, your portfolio's chance of giving you higher returns
increases. Investors exercise extra caution while choosing their
portfolio but returns are not guaranteed every time.
Today, we bring a
Profitable Mix: Favorable Zacks Rank + Positive Earnings
. A favorable rank indicates positive estimate revisions by
analysts who are optimistic on the future of companies. Then again,
(ESP: Expected Surprise Prediction), is our proprietary methodology
for identifying stocks that have the best chance to surprise with
their next earnings announcement. It shows the percentage
difference between the Most Accurate estimate and the Zacks
Here, we will discuss 3 retail stocks carrying an impressive
Zacks Rank and having a positive Earnings ESP. Our research shows
that for stocks with this combination, the chance of a positive
earnings surprise is as high as 70%. These stocks we believe have
the potential to enrich your portfolio in an economy which is still
undergoing recovery. The third and final data for real gross
domestic product (GDP) revealed a 2.9% decline in the first quarter
of 2014, thus taking away some sheen from the economy, which had
barely started to look strong.
Market watchers believe that the contraction stemmed from an
inclement weather condition that locked consumers indoors, hampered
production and construction activities, and resulted in to soft
home and auto sales. Consumer spending, which accounts for over
two-third of the U.S. economic activity, also grew a moderate 1% in
the quarter, down from the 3.1% jump anticipated.
However, economists believe that the softness in the first
quarter was only temporary. They are hopeful that a much favorable
weather condition now, an improving labor market, recovery in the
housing market and surging demand, will translate into strength in
the U.S. economy as the year progresses. Scaling down of the bond
buying campaign for the fifth time to $35 billion, rising consumer
confidence (85.2 in June 2014 from 82.2 in May 2014) and 5-year low
unemployment rate of 6.3%, hint at a rebounding economy.
Though we believe that the economy will eventually come out of
the woods, the pace of recovery has undoubtedly been dented. In
such a scenario, for investors seeking to apply our profitable mix
strategy to their portfolio, we have identified 3 stocks in the
Restoration Hardware Holdings, Inc.
) is a Zacks Rank #1 (Strong Buy) stock having an earnings ESP of
+1.59%. The current Zacks Consensus Estimate for second-quarter
fiscal 2014 is 63 cents a share, portraying 28.8% growth from the
prior-year period. This Corte Madera, CA-based home furnishing
retailer registered an average positive earnings surprise of 37%
over the trailing four quarters, and has a long-term earnings
growth rate of 28.6%. The company is expected to report on Sep 9,
) is a Zacks Rank #2 (Buy) stock with an earnings ESP of +1.89%.
The current Zacks Consensus Estimate for the second quarter of
fiscal 2014 is pegged at 53 cents a share, reflecting an increase
of 8.3% year over year. This San Francisco, CA-based specialty
retailer of home products registered an average positive earnings
surprise of 5.8% over the trailing four quarters, and has a
long-term earnings growth rate of 14.2%. The company is expected to
report on Aug 27, 2014.
) is a Zacks Rank #2 (Buy) stock having an earnings ESP of +11.11%.
The current Zacks Consensus Estimate for second-quarter fiscal 2014
is 18 cents a share. This Lynnwood, WA based specialty retailer of
action sports related apparel and footwear registered an average
positive earnings surprise of 41.4% over the trailing four
quarters, and has a long-term earnings growth rate of 14.2%. The
company's earnings are expected for a Sep 4, 2014 release.
Who doesn't want a portfolio of stocks that have the potential
to outperform and beat earnings estimate? You can use
Zacks Stock Screener
to find stocks with this winning combination.
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ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
RESTORATION HDW (RH): Free Stock Analysis
WILLIAMS-SONOMA (WSM): Free Stock Analysis
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