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Will Chico's (CHS) Repeat its Earnings Beat Trend in Q3?

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Chico's FAS Inc. (CHS - Free Report) is slated to report third-quarter fiscal 2016 results on Nov 22. Last quarter, the company posted a positive earnings surprise of 13.6%. However, it has underperformed the Zacks Consensus Estimate by an average of 13.6% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

CHICOS FAS INC Price and EPS Surprise

CHICOS FAS INC Price and EPS Surprise | CHICOS FAS INC Quote

Factors Influencing This Quarter

Chico's remains focused on its cost control and operating efficiency endeavors, which were declared in May 2016. In line with these strategies, the company announced new plans to enhance its supply chain and optimize marketing costs, alongside lowering non-merchandise purchasing costs. These are aimed at curtailing complexities and standardizing business processes, enabling the company to cater to the evolving customer demand.

However, owing to a tough retail environment and sluggish traffic, the company had projected comparable store sales to decline in the low single-digit range in the second half of the fiscal year. Further, gross margin is expected to decline in the second half due to lower sales and store occupancy expenses deleverage, offset by higher merchandise margins. Nonetheless, synergies from the aforementioned cost reduction and operating efficiency plans are anticipated to provide some cushion.

Given these mixed factors, it’s better to wait and see if Chico’s can deliver an earnings beat this time around too.

Earnings Whispers

Our proven model does not conclusively show that Chico's is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Chico's currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Chico's Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

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:

Hibbett Sports Inc. (HIBB - Free Report) is expected to report earnings on Nov 18 and currently has an Earnings ESP of +4.00%. The stock holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores, Inc. (BURL - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +6.06%, is expected to release earnings on Nov 22.

Dollar Tree, Inc. (DLTR - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +1.28%, is expected to release earnings on Nov 22.
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