Bear Of The Day: Zumiez (ZUMZ)
Zumiez (ZUMZ) is a Zacks Rank #5 (Strong Sell) after missing on the bottom line in the most recent earnings release. With the economy looking at the real possibility of a recession investors are not going to be kind to stocks that miss earnings. Let’s look at why this stock is a Zacks Rank #5 (Strong Sell) in this Bear of the Day article.
Description
Zumiez Inc. is an American multinational specialty clothing store founded by Thomas Campion and Gary Haakenson in 1978, and publicly traded since 2005. The company is a specialty retailer of apparel, footwear, accessories and hardgoods for young men and women.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of ZUMZ, I see two straight misses which preceeded two straight beats of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For ZUMZ I see annual estimates moving lower.
The current year 2022 consensus number has dropped from $4.73 to $3.61 over the last 60 days.
The next year has dropped from $5.71 to $4.01 over the same time period.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Chart
Zumiez Inc. Price and Consensus
Zumiez Inc. price-consensus-chart | Zumiez Inc. Quote
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