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Analyst Blog

Minnesota-based Regis Corp. (RGS - Analyst Report) is set to report fourth-quarter and fiscal results on Aug 26, 2014, before the opening bell.

In the last quarter, the company posted a negative earnings surprise of 150%, primarily due to weak same-store sales and increase in depreciation expenses. Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider this Quarter

Regis has been affected for quite some time now by the sluggishly recovering U.S. economy. The company’s bottom line has been reeling under pressure due to lower revenues, higher labor costs and mounting retail expenses. We do not expect the fourth quarter to be any different and the company will continue to post reduced service as well as product revenues, which will affect fourth-quarter comps too.

Earnings Whispers?

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

Zacks ESP: The Earnings ESP for Regis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 3 cents

Zacks Rank: Regis has a Zacks Rank #3 (Hold), which when combined with a 0.00% 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 momentum.

Other Stocks to Consider

Here are some other companies in the broader retail sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Fossil Group, Inc. (FOSL - Analyst Report), with an Earnings ESP of +0.55% and a Zacks Rank #3.

Abercrombie & Fitch Co. (ANF - Analyst Report), with an Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).

Dollar Tree, Inc. (DLTR - Analyst Report), with an Earnings ESP of +7.69% and a Zacks Rank #3.