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Factors Likely to Influence Sally Beauty's (Sbh) Q1 Earnings

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Sally Beauty Holdings, Inc. (SBH - Free Report) is scheduled to report first-quarter fiscal 2019 results on Feb 5, before the opening bell. In the last reported quarter, the company’s bottom line outpaced the Zacks Consensus Estimate by 6.3%. Let’s see what’s in store for Sally Beauty this time around.

How are Estimates Faring?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 52 cents, reflecting an increase of 18.2% from the year-ago quarter’s figure. However, we note that the consensus mark has declined by a penny over the past 30 days. For revenues, the consensus mark stands at $991.8 million, down 0.3% from $995 million in the year-ago period.

Sally Beauty Holdings, Inc. Price and EPS Surprise

Factors to Consider

Sally Beauty is well poised to tap the rising demand for beauty products. To make the most of it, the company is committed toward constant innovation, product launches, buyouts and strengthening of digital operations. Surely, such efforts are likely to improve top-line performance.

The company is also progressing well with its transformation plan, which was introduced in April 2018 to reduce costs and increase focus on its core products such as hair color and hair care. Sally Beauty recently launched newly re-formulated Wella Koleston Perfect color line along with new hair care range from Guy Tang and Pravana brands. Apart from these, a new Sally Beauty Loyalty Program has also been introduced in all its Sally Beauty Supply stores.

While these factors raise optimism about the quarter, the company’s soft margin trend is a concern. The company has been bearing the brunt of dismal margins for the past few quarters. We note that adjusted operating margin shrunk 120 basis points (bps), 130 bps and 70 bps in the second, third and fourth quarters of fiscal 2018, respectively. Going ahead, adjusted operating earnings and operating margin are anticipated to fall marginally in fiscal 2019, owing to increase in adjusted SG&A expenses, partly offset by same-store sales improvement.

What the Zacks Model Unveils

Our proven model shows that Sally Beauty is likely to beat earnings estimates this quarter. This is because 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sally Beauty has a Zacks Rank #3 and an Earnings ESP of +2.45%, which makes us confident of a beat.

Other Stocks With Favorable Combination

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

Chipotole Mexican Grill (CMG - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bloomin’ Brands (BLMN - Free Report) has an Earnings ESP of +4.81% and a Zacks Rank #3.

BJ’s Restaurants (BJRI - Free Report) has an Earnings ESP of +2.08% and a Zacks Rank #3.

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