Saks Expected to Beat in 4Q

We expect luxury retailer Saks Inc. (SKS - Analyst Report) to beat expectations when it reports fourth quarter and full year fiscal 2013 results on Feb 26, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Saks is likely to beat estimates because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at+6.67%.This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

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

The combination of the stock’s Zacks Rank #3 (Hold) and +6.67% ESP makes us highly confident of a positive earnings beat on Feb 26.

What is Driving the Better-than-Expected Earnings?

Saks’ underlying business is gaining momentum due to its strong same store sales that were the result of the company’s investments in omni channel initiatives and strategies coupled with efficient cost management.

Saks delivered solid earnings results in both the second and third quarters, which were well ahead of prior-year quarter earnings. Saks posted positive surprises for the last four quarters with an average surprise of 16.27%.

Saks women's and men's contemporary apparel, women's and men's shoes, handbags, fine jewelry and fragrances, have continued to post positive comparable store sales for more than two years consecutively.

Investment in omni channel retailing will help Saks boost sales as customers have the option of shopping through all available shopping channels such as mobile Internet devices, computers, television, catalog and others. Moreover, disciplined cost management and operational initiatives are expected to improve margins in the coming quarter.

Overall, growth prospects for 2013 look bright, as operating margin and earnings improvements are expected to continue.

Other Stocks to Consider

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

New York & Company Inc. (NWY - Snapshot Report) with an Earnings ESP of +12.50% and a Zacks Rank #2 (Buy).

Abercrombie & Fitch Company (ANF - Analyst Report) with an Earnings ESP of +2.59% and a Zacks Rank #2 (Buy).

Dollar Tree Inc. (DLTR - Snapshot Report) has an Earnings ESP of +1.01% and a Zacks Rank #3 (Hold).