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Can Fred's (FRED) Spring a Surprise this Earnings Season?
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Fred's, Inc. is slated to report first-quarter fiscal 2017 results on Jun 6, before the opening bell. The question lingering in investors’ minds is, whether this leading discount retailer will be able to post positive earnings surprise again in the to-be-reported quarter. The company’s earnings have outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 11.9%.
Let’s delve deeper how things are shaping up for this announcement.
What Does the Zacks Model Unveil?
Our proven model shows that Fred's is likely to beat estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Fred's has an Earnings ESP of +16.67%. This is because the Most Accurate estimate is at a loss of 5 cents, while the Zacks Consensus Estimate is pegged at a loss of 6 cents. Moreover, the company has a Zacks Rank #3, which increases the predictive power of ESP, making us very optimistic about a possible earnings beat.
Which Way are Estimates Treading?
Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate pegged at a loss of 6 cents for the fiscal first quarter has widened by a penny over the last 30 days. In fact, the same is also pegged down from earnings of 3 cents delivered in the year-ago quarter.
Furthermore, the Zacks Consensus Estimate of 39 cents for fiscal 2017 is up from a loss of 52 cents recorded in fiscal 2016.
Factors Influencing the Quarter
On May 4, Fred’s reported total sales of $532.9 million for the fiscal first quarter, down 3% from the prior-year quarter. On a comparable-store basis, sales declined 1.2% year to date against a 1% rise in the year-ago period. In the fiscal first quarter, comparable store sales (comps) included an unfavorable impact of 1.4% from the sale of low productive discontinued inventory compared with the year-ago quarter.
Though sales declined year over year, we note that Fred’s witnessed sales growth on a sequential basis backed by its initiatives. Notably, the company’s Specialty segment is witnessing double-digits sales growth. Going forward, it is likely to improve through the expansion of therapies, new additions to the sales force and the expansion into 340B programs for Specialty Pharmacy. Meanwhile, in Retail Pharmacy, adjusted script comps have improved sequentially.
Moving ahead, Walgreen-Rite Aid Merger will also benefit Fred’s by improving its healthcare growth strategy. In addition, this leading discount retailer remains on track to revamp its business, thereby boosting overall profitability. Fred's shares have gained 34.1% in the past six months against the Zacks categorized Retail–Discount & Variety industry’s decline of 2.2%. The industry is currently placed at bottom 37% of the Zacks Classified industries (161 out of 256).
However, Fred’s’ traffic trends have remained sluggish for the past few quarters. Also, lack of international exposure poses a threat to its macroeconomic headwinds.
Stocks Poised to Beat Earnings Estimates
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:
The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #3.
Lithia Motors, Inc. (LAD - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Can Fred's (FRED) Spring a Surprise this Earnings Season?
Fred's, Inc. is slated to report first-quarter fiscal 2017 results on Jun 6, before the opening bell. The question lingering in investors’ minds is, whether this leading discount retailer will be able to post positive earnings surprise again in the to-be-reported quarter. The company’s earnings have outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 11.9%.
Let’s delve deeper how things are shaping up for this announcement.
What Does the Zacks Model Unveil?
Our proven model shows that Fred's is likely to beat estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Fred's, Inc. Price, Consensus and EPS Surprise
Fred's, Inc. Price, Consensus and EPS Surprise | Fred's, Inc. Quote
Fred's has an Earnings ESP of +16.67%. This is because the Most Accurate estimate is at a loss of 5 cents, while the Zacks Consensus Estimate is pegged at a loss of 6 cents. Moreover, the company has a Zacks Rank #3, which increases the predictive power of ESP, making us very optimistic about a possible earnings beat.
Which Way are Estimates Treading?
Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate pegged at a loss of 6 cents for the fiscal first quarter has widened by a penny over the last 30 days. In fact, the same is also pegged down from earnings of 3 cents delivered in the year-ago quarter.
Furthermore, the Zacks Consensus Estimate of 39 cents for fiscal 2017 is up from a loss of 52 cents recorded in fiscal 2016.
Factors Influencing the Quarter
On May 4, Fred’s reported total sales of $532.9 million for the fiscal first quarter, down 3% from the prior-year quarter. On a comparable-store basis, sales declined 1.2% year to date against a 1% rise in the year-ago period. In the fiscal first quarter, comparable store sales (comps) included an unfavorable impact of 1.4% from the sale of low productive discontinued inventory compared with the year-ago quarter.
Though sales declined year over year, we note that Fred’s witnessed sales growth on a sequential basis backed by its initiatives. Notably, the company’s Specialty segment is witnessing double-digits sales growth. Going forward, it is likely to improve through the expansion of therapies, new additions to the sales force and the expansion into 340B programs for Specialty Pharmacy. Meanwhile, in Retail Pharmacy, adjusted script comps have improved sequentially.
Moving ahead, Walgreen-Rite Aid Merger will also benefit Fred’s by improving its healthcare growth strategy. In addition, this leading discount retailer remains on track to revamp its business, thereby boosting overall profitability. Fred's shares have gained 34.1% in the past six months against the Zacks categorized Retail–Discount & Variety industry’s decline of 2.2%. The industry is currently placed at bottom 37% of the Zacks Classified industries (161 out of 256).
However, Fred’s’ traffic trends have remained sluggish for the past few quarters. Also, lack of international exposure poses a threat to its macroeconomic headwinds.
Stocks Poised to Beat Earnings Estimates
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:
Bed Bath & Beyond Inc. has an Earnings ESP of +1.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #3.
Lithia Motors, Inc. (LAD - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>