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Staples, Inc. (SPLS - Analyst Report), the office supplies retailer, is slated to post fourth quarter and fiscal 2013 results of Mar 6, 2014. In the last quarter, earnings of 42 cents a share came in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

In the previous quarter, lower sales on account of store closures and lower product margins took a toll on Staple’s earnings. Margins contracted primarily due to reduced product margins, unfavorable impact of fixed expenses on reduced sales and investments related to the company’s strategic initiatives. These negatives were offset by savings pertaining to headcount reductions and fall in marketing expense and equity compensation. However, given the decline in business and consumer spending in the wake of the global meltdown, the office supply retailers are going through a rough patch.

Earnings Whispers?

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

Negative Zacks ESP: Staples currently has an Earnings ESP of -2.56%. This is because the Most Accurate estimate stands at 38 cents, while the Zacks Consensus Estimate is pegged at 39 cents.

Zacks Rank #4 (Sell): Staples holds a Zacks Rank #4 (Sell). We caution against stocks with Zacks #4 and #5 Ranks (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:  

Crown Castle International Corp. (CCI - Analyst Report), Earnings ESP of +3.57% and a Zacks Rank #2 (Buy).

Ball Corporation (BLL - Analyst Report), Earnings ESP of +2.94% and a Zacks Rank #1 (Strong Buy).

AutoZone, Inc. (AZO - Analyst Report), Earnings ESP of +1.80% and a Zacks Rank #2 (Buy).


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