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Will GameStop (GME) Miss Earnings Estimates? - Analyst Blog

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GameStop Corp. ( GME ), the video game retailer, is slated to report its first-quarter fiscal 2014 results on May 22, 2014. In the last quarter, it posted a negative surprise of 1.04%. Let's see how things are shaping up for this announcement.

Factors Influencing This Quarter

GameStop's performance could be attributable to the fact that the video game industry is highly competitive and shoppers have many alternatives to buy software, hardware and other video game accessories. Moreover, top retail companies have now entered into the video game market, which could dent the company's sales and margins.

Earnings Whispers?

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

Negative Zacks ESP: ESP for GameStop is -1.75%. This is because the Most Accurate estimate stands at 56 cents, while the Zacks Consensus Estimate is pegged at 57 cents a share.

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

Stocks That Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

The Kroger Co. ( KR ) has an Earnings ESP of +0.95% and a Zacks Rank #2 (Buy).

Lions Gate Entertainment Corp. ( LGF ) has an Earnings ESP of +7.69% and a Zacks Rank #3 (Hold).

Best Buy Co., Inc. ( BBY ) has an Earnings ESP of +10.53% and a Zacks Rank #3 (Hold).

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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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