The world's largest home improvement retailer, Home Depot Inc. ( HD ) is set to report its third-quarter fiscal 2014 results on Nov 18. In the last quarter it posted a positive surprise of approximately 5.6%. Let's see how things are shaping up for this announcement.
Factors Influencing the Upcoming Results
Following a robust second-quarter fiscal 2014 the company raised its earnings growth forecast for the year while it retained its sales forecast. The company expects sales to increase 4.8% while earnings to grow by 20.2% to $4.52 per share in fiscal 2014. This earnings optimism came from the company's year-to-date share buybacks and future plans. However, how well this optimism about share repurchases works for Home Depot is yet to be seen. We believe that the company remains on the back foot for the upcoming quarter due to the promotional retail environment.
Our proven model does not conclusively show that Home Depot 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.
Zacks ESP: Home Depot currently has an Earnings ESP of 0.00%. This is because the Most Accurate estimate stands at $1.13 a share, which is in line with the Zacks Consensus Estimate.
Zacks Rank: Home Depot carries a Zacks Rank #3 (Hold), which when combined with a Zero ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Best Buy Co. Inc. ( BBY ) has an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy).
Campbell Soup Co. ( CPB ) has an Earnings ESP of +1.37% and a Zacks Rank #3.
DSW Inc. ( DSW ) has an Earnings ESP of +1.96% and a Zacks Rank #3.