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Can Wet Seal (WTSL) Surprise This Earnings Season?

SJM HBI KORS

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The Wet Seal Inc. is set to report third-quarter fiscal 2013 results on Dec 4. Last quarter, it posted in-line earnings. Let us see how things are shaping up for this announcement.

Factors to be Considered this Quarter

On Nov 7, Wet Seal announced third-quarter fiscal 2013 sales results. Though comparative sales increase of 0.8% improved from the prior-year quarter’s decline of 13.5%, it was below management’s expectation of low single-digits gain. Sales also declined 5.8% year over year. Wet Seal expects third-quarter loss to range between 10 cents to 12 cents per share. We want to remind investors that the guidance reflects a wider loss of a band of 2 cents to 3 cents expected previously. The cautious guidance reflects a weak mall traffic for the past few months.

Earnings Whispers?

Our proven model does not conclusively show that Wet Seal is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Wet Seal is 0.00%.

Zacks Rank: Wet Seal’s Zacks Rank #4 (Sell) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #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 you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Hanesbrands Inc. (HBI - Free Report) , with Earnings ESP of +1.11% and a Zacks Rank #1 (Strong Buy)

Michael Kors Holdings Limited (KORS - Free Report) , with Earnings ESP of +1.16% and a Zacks Rank #2 (Buy)

The J. M. Smucker Company (SJM - Free Report) , with Earnings ESP of +1.83% and a Zacks Rank #3 (Hold)


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