) is scheduled to report its second-quarter results on Jul 31 after
the market closes. The Zacks Consensus Estimate for the quarter is
pegged at one cent per share.
In the preceding quarter, the company reported better-than-expected
results with a positive earnings surprise of 29.41%. Having
recorded an average earnings surprise of 89.85% in the last four
quarters, can Skullcandy keep the earnings streak alive in the
second quarter as well? Let us see how things are shaping up prior
to this announcement.
Factors to Influence Q2 Results
Innovation and diversified product offerings remain the keys to
Skullcandy's success. The company's product portfolio includes
audio and gaming headphones, earbuds, speakers and other
accessories. In Apr 2014, the company launched headphones and
earbuds especially designed for women. This product line is
expected to capitalize on growing demand for trendy audio and
Further, Skullcandy's contractual relations with some electronic
companies will aid its business expansion through product awareness
and better marketing. The contract with Toshiba Corporation (
), signed in Jan 2014, requires Skullcandy to enhance the audio
quality of the former's products. Also, the company will gain the
license to market consumer laptops worldwide (excluding China).
However, risks associated with negative foreign currency
translations and stiff competition in all the businesses limit the
company's growth prospects in the near term. Also, rising costs
represent a major headwind. In the last five years, cost of sales
has soared 92%.
Our proven model does not conclusively show that Skullcandy is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Expected Surprise Prediction or ESP, which represents the
difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is currently 0.00%. This indicates in-line
earnings for Skullcandy.
Skullcandy's Zacks Rank #2 (Buy), when combined with a 0.00% ESP,
makes surprise predictions 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 a
negative estimate revision 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 this quarter:
Newell Rubbermaid Inc. (
), with Earnings ESP of +1.85% and a Zacks Rank #2.
Harman International Industries, Incorporated (
), with Earnings ESP of +0.82% and a Zacks Rank #3 (Hold).
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NEWELL RUBBERMD (NWL): Free Stock Analysis
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SKULLCANDY INC (SKUL): Free Stock Analysis
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