Here's How Sally Beauty (SBH) Looks Ahead of Q3 Earnings

Sally Beauty Holdings, Inc. SBH is likely to post decline in the top and bottom line when it reports third-quarter fiscal 2020 results. In fact, the Zacks Consensus Estimate for fiscal third quarter is pegged at a loss of 2 cents, against an earnings of 60 cents registered in the year-ago quarter. Moreover, the loss estimate has widened by a cent in the past 7 days. Also, the consensus estimate for quarterly revenues of $705.1 million suggests a decline of 27.7% from the prior-year quarter’s tally.

Notably, this international specialty retailer and distributor of professional beauty supplies has a trailing four-quarter earnings surprise of 1.6%, on average

Sally Beauty Holdings, Inc. Price and EPS Surprise

Sally Beauty Holdings, Inc. Price and EPS Surprise

Sally Beauty Holdings, Inc. price-eps-surprise | Sally Beauty Holdings, Inc. Quote

Key Factors to Note

With restrictions to check the coronavirus outbreak being lifted, Sally Beauty is reopening its retail and wholesale operations. In fact, the company is witnessing robust consumer as well as professional demand since its stores reopened. This is likely to have had a positive impact on the top line in the third quarter of fiscal 2020.

In an earlier press release, management stated that revenues for April came in at $95 million. Also, the company expects enterprise-wide sales of $262 million for May. In a recent press release, management stated that enterprise-wide sales for June are expected at $348 million, which suggests 9% increase from the year-ago quarter’s reported figure. For the third quarter of fiscal 2020, management anticipates enterprise-wide revenues of $705 million.

Sally Beauty is witnessing increased consumer demand on digital platforms amid the pandemic. In fact, management expects a triple-digit e-commerce growth across all segments in the fiscal third quarter. Markedly, the company projects a 278% year-over-year growth in consolidated digital operations for the to-be-reported quarter.

However, the company’s Sally Beauty Supply (SBS) segment is struggling due to coronavirus-induced hurdles and lower store counts. Also, unfavorable foreign-currency rates are a headwind for the company. Apart from this, Sally Beauty is struggling with higher SG&A expense, which in turn is exerting pressure on the company’s margins.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predictan earnings beat for Sally Beauty this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sally Beauty carries a Zacks Rank #3 and an Earnings ESP of -206.67%.

Stocks With Favorable Combination

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

Big Lots, Inc. BIG currently has an Earnings ESP of +11.83% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG has an Earnings ESP of +3.62% and a Zacks Rank #1.

Best Buy BBY currently has an Earnings ESP of +15.20% and a Zacks Rank of 2.

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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.

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