Back to top

Analyst Blog

Family Dollar Stores Inc. (FDO - Analyst Report), an S&P 500 company, is slated to report its third-quarter fiscal 2013 results on Jul 10. In the last quarter, it posted a negative surprise of 0.8%. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

The unexpected delay in tax refunds of 2012 adversely impacted sales at the end of January and at the beginning of February, resulting in lower-than-expected second-quarter fiscal 2013 results. The increase in sales of lower margin merchandises facilitated the contraction in gross margin. Further, management hinted that discretionary sales would remain under pressure.

Earnings Whispers?

Our proven model does not conclusively show that Family Dollar is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) 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: ESP for Family Dollar is -2.91%. This is because the Most Accurate Estimate stands at $1.00, while the Zacks Consensus Estimate is pegged at $1.03.

Zacks Rank #4 (Sell): Family Dollar’s Zacks Rank #4 (Sell) lowers the predictive power of ESP because the Zacks Rank #4 when combined with a negative ESP makes surprise prediction difficult. 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

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

ManpowerGroup Inc. (MAN - Analyst Report), Earnings ESP of +3.33% and a Zacks Rank #1 (Strong Buy).

Deckers Outdoor Corp. (DECK - Analyst Report), Earnings ESP of +13.21% and a Zacks Rank #2 (Buy).

Rent-A-Center, Inc. (RCII - Analyst Report), Earnings ESP of +1.33% and a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.