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Will Staples (SPLS) Stock Gain Post Q4 Earnings Release?

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Staples, Inc. is expected to report fourth-quarter fiscal 2016 results on Mar 3. In the previous quarter, the company had reported in-line earnings. Let’s see how things are shaping up for this announcement.

What to Expect?

The question lingering in investors’ minds now is, whether Staples will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 25 cents, reflecting a year-over-year decrease of nearly 4%. We note that the Zacks Consensus Estimate have been stable in the last 60 days. Analysts polled by Zacks expect revenues of $5,025 million, declining 4.6% from the year-ago quarter.

We note that the stock has outperformed the Zacks categorized Retail-Miscellaneous/Diversified industry in the past six months but have marginally lagged the S&P 500 index. In the past six months, the company’s shares have gained 7.3%, while the Zacks categorized industry has lost 4.3%. Meanwhile, the S&P 500 has gained 8% during the same time frame.

Factors at Play

We believe the company’s decision to streamline operations to enhance productivity and performance in North America by expanding services, strengthening customer base, shutting down underperforming stores and decreasing fixed costs bode well for the company. In order to acquire new customers, Staples is increasing offering of products as well as services beyond office supplies. Further, it is trying to firm its position in mid-market contracts, as evident from the buyout of an independent office products dealer, Acquired Capital Office Products.

With respect to the cost containment efforts, management is employing a more efficient customer coverage model, focusing on lowering indirect procurement costs, enhancing supply chain and increasing mix of Staples’ brand products. The company has initiated a new cost-saving program to garner nearly $300 million of annualized pre-tax savings by 2018. Earlier, the company stated that it was hopeful of achieving approximately $70 million of annualized pre-tax cost savings in fiscal 2016.

What Does the Zacks Model Unveil?

Our proven model shows that Staples is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The Most Accurate estimate stands at 26 cents, while the Zacks Consensus Estimate is pegged lower at 25 cents. So the ensuing difference – the Earnings ESP – is of +4.00%. A positive ESP combined with the company’s Zacks Rank #3, makes us reasonably confident of an earnings beat. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Staples, Inc. Price, Consensus and EPS Surprise

Staples, Inc. Price, Consensus and EPS Surprise | Staples, Inc. Quote

Other Stocks Poised to Beat Earnings Estimates

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

Fred's, Inc. has an Earnings ESP of +15.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Panera Bread Company has an Earnings ESP of +0.56% and a Zacks Rank #3.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +0.74% and a Zacks Rank #3.

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