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We expect Big Lots Inc. (BIG - Analyst Report), a broad-line closeout retailer, to beat expectations when it reports second-quarter fiscal 2013 results on Aug 30, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Big Lots is likely to beat earnings because it has the right combination of two key components.  

Positive Zacks ESP: Big Lots currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +12.00%. This is because the Most Accurate Estimate stands at 28 cents, while the Zacks Consensus Estimate is pegged at 25 cents.               

Zacks Rank #3 (Hold): Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell-rated stocks (Zacks Rank #4 and #5) should never be considered going into an earnings announcement.

The combination of Big Lots’ Zacks Rank #3 (Hold) and +12.00% ESP makes us very confident regarding a positive earnings beat on Aug 30.

What is Driving the Better-than-Expected Earnings?     

Big Lots closeout format provides it an edge over traditional discount retailers as it offers merchandise assortments to customers at very lower prices. We believe the second half of fiscal 2013 looks good for the company as management has undertaken initiatives such store remodel, changes to its loyalty reward program and bringing in coolers and freezers to expand merchandise consisting of food-related items and target food stamp recipients. The positive trend is seen in the trailing four-quarter average surprise of 17.1%.

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 to post an earnings beat:

Citi Trends, Inc. (CTRN - Analyst Report), Earnings ESP of +10.00% and a Zacks Rank #1 (Strong Buy).

Five Below, Inc. (FIVE - Snapshot Report), Earnings ESP of +11.11% and a Zacks Rank #2 (Buy).

Dollar Tree, Inc. (DLTR - Analyst Report), Earnings ESP of +1.70% and a Zacks Rank #3 (Hold).

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