Avis Budget Group Inc. (CAR) is set to report its fourth quarter and fiscal 2013 results after the market closes on Feb 19. Last quarter, this global car rental company posted a negative earnings surprise of approximately 3.9%. Let's see how things are shaping up for this announcement.
Growth Factors in the Past Quarter
Despite posting lower-than-expected figures, Avis Budget’s third-quarter 2013 earnings were above the prior year numbers on the back of improved volume growth trend and strong pricing trends in North America, along with robust performance of the EMEA (Europe, Middle East and Asia) region. In the third quarter, Avis Budget’s top line improved driven by the acquisition of Zipcar and a 6% rise in rental days. Segment-wise, revenue rose at all of the company’s segments with North America revenue up 11.4%, International revenue up 10%, while Truck Rental revenue remained flat.
Our proven model does not conclusively project Avis Budget as likely to beat earnings this quarter. A stock needs to have both positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
Zacks ESP: ESP (Expected Surprise Prediction) for Avis Budget is 0.00% since the Most Accurate estimate stands at 12 cents per share, which is in line with the Zacks Consensus Estimate.
Zacks #2 Rank (Buy): Avis Budget’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.
Other Stocks to Consider
Avis Budget is not the only firm we are looking up to this earnings season. Our model shows that the following stocks have the right combination to post an earnings beat:
AutoZone Inc. (AZO) Earnings ESP stands at 1.99% and it carries a Zacks Rank #2 (Buy).
Columbia Sportswear Company (COLM) has an Earnings ESP of 3.37% and a Zacks Rank #2 (Buy).
Foot Locker Inc. (FL) with an Earnings ESP of 8.00% holds a Zacks Rank #2 (Buy).