Will PetSmart (PETM) Miss Estimates this Earnings Season?


PetSmart, Inc. (PETM), one of the leading pet food and related services superstore, is slated to report its second-quarter 2014 earnings on Aug 20, before the opening bell. In the previous quarter, PetSmart recorded a positive earnings surprise of nearly 2%. Let’s see how things are shaping up for this announcement.       

Factors Influencing this Quarter

PetSmart’s first-quarter earnings were driven by its innovative and differentiated products, along with its sustained efforts to expand brand portfolio and assortments. However, the top line missed estimates owing to the challenging consumer environment coupled with competitive headwinds, which are expected to linger this quarter. Also, PetSmart faces competition from giants like Wal-Mart Stores Inc. (WMT), which have lately penetrated the pet supply market. However, management remains focused on driving results by implementing efficient capital allocation, returning value to shareholders and managing expenses well.

Earnings Whispers

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

Zero Zacks ESP: PetSmart currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 94 cents.

Zacks Rank: PetSmart’s Zacks Rank #4 (Sell) lowers the predictive power of ESP.

We caution against stocks with Zacks Rank #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 they have the right combination of elements to post an earnings beat:

Abercrombie & Fitch Co. (ANF), Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).

J. C. Penney Company, Inc. (JCP), Earnings ESP of +5.10% and a Zacks Rank #2.


Read the Full Research Report on WMT
Read the Full Research Report on PETM
Read the Full Research Report on JCP
Read the Full Research Report on ANF

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