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Can Leggett's (LEG) Q4 Earnings Maintain the Solid Trend?

Leading producer of engineered products, Leggett & Platt, Inc.LEG is slated to report fourth-quarter 2016 results on Jan 30, 2017. Last quarter, the company delivered a positive earnings surprise of 8.1%. In fact, the company's earnings have outperformed the Zacks Consensus Estimate by an average of 12.4% over the trailing four quarters, with a beat in each quarter. Let's see how things are shaping up for this announcement.

Leggett & Platt Inc. Price and EPS Surprise

Leggett & Platt Inc. Price and EPS Surprise | Leggett & Platt Inc. Quote

Factors Influencing This Quarter

Leggett has been doing well, backed by its persistent focus on making investments to develop its business portfolio, strategic initiatives to drive growth and a disciplined capital allocation strategy. Further, the company is progressing well with its long-term strategy of achieving top-line growth of 4-5% annually.

The company has completed the first two parts of its plan successfully, and is now working on the third part of the plan. These factors, along with reduced commodity expenses also helped the company to post its fifth consecutive earnings beat in the last reported quarter.

Following the results, management raised its full-year 2016 earnings outlook as it continues to anticipate generating record EPS, robust EBIT margin and enhanced cash flows this year. All these factors highlight Leggett's growth prospects, ushering in confidence about the upcoming results.

However, Leggett has been posting dismal sales for a while now, as its last reported quarter represented the company's sixth straight sales miss. This also caused the company to lower its sales outlook for 2016. Additionally, Leggett's significant global presence exposes it to foreign currency headwinds, which have been hurting its results for quite some time now. Due to these challenges, Leggett's shares have tanked nearly 10.3% in the last six months, underperforming the Zacks categorized Furniture industry's decline of 4.3%.

Let's see if Leggett's solid growth drivers can help it overcome these obstacles and maintain its robust earnings streak this quarter.

Earnings Whispers

Our proven model does not conclusively show that Leggett is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: Leggett currently has an Earnings ESP of 0.00%. This is because, both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 58 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter

Zacks Rank: Leggett's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Tractor Supply Company TSCO , slated to report earnings on Feb 1, has an Earnings ESP of +1.09% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Michael Kors Holdings Ltd. KORS , scheduled to report earnings on Feb 7, has an Earnings ESP of +2.45% and a Zacks Rank #1.

Yum! Brands, Inc. YUM , scheduled to report earnings on Feb 8, has an Earnings ESP of +2.82% and a Zacks Rank #3.

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Leggett & Platt, Incorporated (LEG): Free Stock Analysis Report

Yum! Brands, Inc. (YUM): Free Stock Analysis Report

Tractor Supply Company (TSCO): Free Stock Analysis Report

Michael Kors Holdings Limited (KORS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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