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Bear of the Day: Foot Locker (FL)

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Today’s Bear of the Day is a stock that had been a high-flier until last quarter. A bearish earnings report sealed the deal for the bears, causing a tough selloff for long-term investors. The writing was, however, on the wall before this report. Earnings estimates had already begun to rollover, well ahead of the report. One way to uncover this potential looming danger in stocks is to lean on the Price, Consensus and Earnings chart on Zacks. I’ll show you how to avoid these potential pitfalls in the future by using this chart.

The stock I’m talking about is Zacks Rank #5 (Strong Sell) Foot Locker (FL - Free Report) . Foot Locker, Inc., through its subsidiaries, operates as an athletic shoes and apparel retailer. The company operates in two segments, North America and International. The company retails athletic footwear, apparel, accessories, and equipment under various formats, including Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep, and SIX:02. It also sells team licensed merchandise for high school and other athletes.

The reason for the unfavorable rank lies in the series of earnings estimate revision to the downside coming from analysts. Following its last earnings report, eleven analysts cut their earnings estimates for both the current year and next year. The bearish sentiment has dropped the Zacks Consensus Estimate for the current year down from $5.20 to $5.02. Next year’s number has also been brought lower, from $5.68 to $5.44.

Taking a quick look at the Price, Consensus and EPS Surprise chart, you can see the earnings trend begin to top out in mid-2019. Estimates rounded off, flattening after a strong trend upwards. The red arrows on this chart also indicate earnings reports which missed consensus estimates. Note the downtrend in estimates in mid-2017 which led to two straight misses. So far, estimates have just come down a little for Foot Locker, meaning that the worst could be over. Look for an uptick in estimates to signal that the stock is out of the woods.

The Retail – Apparel and Shoes Industry is in the Top 38% of our Zacks Industry Rank. Other stocks within the same industry to check out include three Zacks Rank #1 (Strong Buy) stocks. These include Genesco (GCO - Free Report) and Xcel Brands (XELB - Free Report) .

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Xcel Brands, Inc (XELB) - free report >>

Genesco Inc. (GCO) - free report >>

Foot Locker, Inc. (FL) - free report >>