Supervalu Inc. ( SVU ) is set to report third quarter 2013 results on January 10. Last quarter, it posted a -12% negative surprise. Let's see how things are shaping up for this announcement.
Growth Factors Past Quarter
Supervalu Inc. was badly affected by the recent economic downturn that reduced discretionary purchases by U.S. customers. Moreover, high inflation has proved to be a challenge for several of its financially fragile customers.
Volatility in global and financial markets due to uncertainties related to energy costs, difficulties in the banking and financial sectors, falling consumer confidence and rising unemployment rates, have all contributed to the decline in consumer spending. Consumers are also shifting to less expensive groceries that discounters typically provide.
Since other discounters are fighting to grab this demand, Supervalu was forced to maintain low prices. Input costs did not let up however, so Supervalu ended up with lower margins.
Our proven model does not conclusively show that Supervalu is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Positive Zacks ESP: This is because the Most Accurate estimate stands at 3 cents while the Zacks Consensus Estimate is higher at 7 cents. That is a difference of -57%.
Zacks Rank #4: Supervalu's Zacks Rank #4 (Sell) increases the chances of a negative surprise. We caution against stocks with Zacks Ranks #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
You could, however, consider stocks like Kroger Company ( KR ), with Earnings ESP of 2.9% and Zacks Rank #2 (Buy) or Procter & Gamble Company ( PG ), with Earnings ESP of 2.7% and Zacks Rank #3 (Hold). Our model shows that these companies have the right combination of elements to post an earnings beat this quarter.
About Earnings ESP
Would you like to own more stocks likely to beat their next earnings report? And avoid stocks likely to disappoint?
If yes, then it's time you learn about the Earnings ESP score available on Zacks.com.