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GNC Holdings (GNC) Q4 Earnings: A Surprise in the Cards?

GNC Holdings, Inc.GNC - a specialty retailer of health and nutrition related products - is scheduled to report fourth-quarter 2016 financial results on Feb 16, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 16.90%. GNC Holdings' trailing four-quarter average earnings also lagged the Zacks Consensus Estimate by 4.84%.

Let's see how things are shaping up prior to this announcement.

GNC Holdings, Inc. Price and EPS Surprise

GNC Holdings, Inc. Price and EPS Surprise | GNC Holdings, Inc. Quote

Factors at Play

We are currently looking forward to GNC Holdings' business plan termed as 'New GNC'. The plan was announced in the last reported third quarter where management chalked out several strategies to overhaul its existing business model. The initiatives include the lowering of single product pricing policy, introduction of new products, free and paid loyalty program, new customer friendly technology like terminals, tablets, Wi-Fi and a mobile app that improves and personalizes shopping experience. We expect this plan to boost results in the yet-to-be-reported fourth quarter.

In the recent past, the company's international business has been a key growth driver. GNC Holdings has been performing well in China for quite some time. Management expects to continue capitalizing on international revenue growth opportunities through the addition of franchise stores in existing markets, expansion into new high-growth markets and growth of product distribution in both existing and new markets. Last quarter, management announced that it has been working hard to regain its emerging market hold, particularly in Mexico and Turkey. Going ahead, management believes the company has tremendous scope for development in these markets.

Of late, GNC Holdings has started to implement its previously announced refranchising strategy, which includes increasing the proportion of its domestic stores that are franchise locations. By the end of the first half of 2016, the company announced that it has refranchised 90 of its company-owned stores. Although, the company is at present uncertain about meeting the 2016 target to refranchise 200 company-owned stores, the plan is still active.

On the flip side, the nutritional supplements industry is characterized by rapid and frequent changes in demand for products and new product introduction. Moreover, GNC Holdings has a number of tough competitors in the market that include large international pharmacy chains, major international supermarket firms and large U.S.-based companies with global operations.

Management expects the company to bring down product prices in the face of stiff competition, which in turn may hurt margins. Further, currency headwinds continue to be a growing concern for GNC Holdings.

Estimate Revision Trend

For the fourth quarter of 2016, there has been no change in estimates over the last 30 days. The same can be observed in the magnitude of the estimate revision trend with earnings estimates remaining at 37 cents over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that GNC Holdings is likely to beat earnings this quarter. That 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. That is not the case here as you will see below.

Zacks ESP: GNC Holdings has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimates are pegged at 37 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: GNC Holdings has a Zacks Rank #3, which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Lannett Company, Inc. LCI has an Earnings ESP of +2.35% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Summit Therapeutics Plc. SMMT has an Earnings ESP of +29.58% and a Zacks Rank #1.

UnitedHealth Group Incorporated UNH has an Earnings ESP of +0.92% and a Zacks Rank #2.

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Lannett Co Inc (LCI): Free Stock Analysis Report

UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report

GNC Holdings, Inc. (GNC): Free Stock Analysis Report

Summit Therapeutics PLC (SMMT): 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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