Pacific Sunwear of California Inc. ( PSUN ), a sports and fashion retailer, is slated to report its second-quarter 2014 earnings on Aug 28, 2014. In the previous quarter, the company delivered a positive earnings surprise of 15.4%. Let's see how things are shaping up for this announcement.
Factors Influencing this Quarter
Pacific Sunwear's first-quarter sales climbed on the back of improvement in comparable store sales and e-commerce sales. Also, growth in merchandise margins drove gross margin expansion. However, weakness in the women's business and persistent tough promotional environment compelled Pacific Sunwear to issue a cautious guidance for this quarter.
Our proven model does not conclusively show that Pacific Sunwear is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) 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 : The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 3 cents.
Zacks Rank : Pacific Sunwear 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 momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Abercrombie & Fitch Co. ( ANF ), Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).
Finish Line Inc. ( FINL ), Earnings ESP of +1.67% and a Zacks Rank #2.
Costco Wholesale Corporation ( COST ), Earnings ESP of +1.33% and a Zacks Rank #3.
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