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GameStop (GME) to Post Q2 Earnings: What Awaits the Stock?

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GameStop Corp. (GME - Free Report) is likely to register top-line growth when it reports second-quarter fiscal 2021 numbers on Sep 8, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $1,125 million, which indicates an increase of 19.4% from the prior-year quarter’s reported figure.

Speaking of the bottom line, the company is expected to report a loss for the quarter in review. The Zacks Consensus Estimate is currently pegged at a loss of 42 cents per share. The consensus mark has been stable in the past 30 days. In the prior-year quarter, the company reported a loss of $1.40 per share. In the last reported quarter, the company’s bottom line outperformed the Zacks Consensus Estimate by 32.8%.

Key Aspects to Note

GameStop’s second-quarter top line is expected to have gained from growth in e-commerce sales. The company’s online wing has been gaining from investments made toward boosting omni-channel capabilities that includes the roll-out of same-day delivery option across stores. Its expanded search and navigation features, post-purchase services, mobile app capabilities as well as flexible payment options have been supporting digital expansion.

The company’s strategic efforts to boost assortments, optimize inventory and manage costs are likely to have contributed to its second-quarter performance. The company has been gaining from its focus on high margin product categories such as PC gaming accessories, private label and collectibles. By evolving its technology infrastructure, the company is striving to capitalize on the new generation of console cycle.

GameStop has been undertaking board restructuring to transform its business. It has formed a Strategic Planning and Capital Allocation Committee. Since the formation of this committee, the company has appointed several board executives with significant experience in e-commerce, customer care and technology. The company completed the sale of 5 million shares through its “at-the-market” equity offering program. The proceeds are being utilized to accelerate transformation as well as for general corporate purposes. Such efforts are likely to have supported GameStop’s performance in the quarter to be reported.

On its last earnings call, management highlighted that second-quarter sales trends have been encouraging and continue to reflect growth. Total sales in May increased nearly 27% year on year.

However, we cannot ignore the concerns surrounding supply-chain constraints amid the pandemic as well as rise in freight expenses. Also, the company’s strategic store de-densification strategy has led to a decline in store base.

GameStop Corp. Price, Consensus and EPS Surprise

 

GameStop Corp. Price, Consensus and EPS Surprise

GameStop Corp. price-consensus-eps-surprise-chart | GameStop Corp. Quote

 

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for GameStop this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

GameStop has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks With Favorable Combination

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

lululemon athletica inc. (LULU - Free Report) currently has an Earnings ESP of +2.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) currently has an Earnings ESP of +0.58% and carries a Zacks Rank #2.

Darden Restaurants, Inc. (DRI - Free Report) currently has an Earnings ESP of +0.82% and a Zacks Rank #3.