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What to Expect From WWW and SCSS in Q3 Earnings?

Zacks Equity Research

The earnings season has started and the picture so far appears to be encouraging. Per the Earnings Preview dated Oct 13, nearly 32 of the S&P 500 members have reported their results. Out of these companies, approximately 81.3% delivered positive earnings surprises while 78.1% surpassed top-line expectations.

Notably, earnings for the 32 S&P 500 companies have advanced 12.8% from the same period last year, with revenues up 6.3%. Further, the report suggests that earnings for the total S&P 500 companies for the third quarter are projected to improve 2.1% year over year, with total revenue increasing 5%.

A Look at Consumer Discretionary Sector

The performance of the index depends upon all 16 Zacks sectors, out of which eight sectors are expected to witness an earnings decline in the third quarter, including the Consumer Discretionary space. The sector has gained 10.4% year to date, lower than the S&P 500’s growth of 14%.  However, the sector is currently ranked in the the Top 50% (8 out of 16) of the Zacks classified sectors.

Moreover, analysts believe that buoyant stock market, gradual wage acceleration, fall in the unemployment rate to a 16-year low, and a lift in the economic activity post hurricanes were enough to boost consumer sentiment.

Per the Zacks Earnings Trends as of Oct 11, about 5.6% of the S&P 500 companies in the Consumer Discretionary sector have reported their results, wherein 100% companies delivered an earnings beat and surpassed revenue estimates. Though the bottom line for these companies declined 2.1% year over year, the top line increased 3%.

Markedly, the Consumer Discretionary sector consists of shoes and retail apparel, furniture as well as leisure and recreation stocks, among others. So, let’s see what awaits the couple of stocks that are likely to report third-quarter 2017 earnings releases on Oct 17.

Well, our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Let’s See How WWW and SCSS Are Placed

Leading designer, manufacturer and marketer of footwear, apparel, and accessories, Wolverine World Wide, Inc. WWW has been gaining from its strategic initiatives. Meanwhile, the company’s proactive efforts, brand innovations and growth have been delivering impressive results. Also, the implementation of the WOLVERINE WAY FORWARD, operational excellence and its solid brand portfolio position the company well to achieve growth.

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise | Wolverine World Wide, Inc. Quote

Notably, the company’s earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters by an average of 18.2%. However, Wolverine is unlikely to beat the current-quarter earnings estimates as it has an Earnings ESP of -0.46%. Moreover, the Zacks Consensus Estimate of 37 cents for the third quarter has moved down by 2 cents in the last 30 days. Nevertheless, the company’s Zacks Rank #2 increases the predictive power of ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Currently, the revenue consensus estimates for the company stands at $551.54 million, down 8.6% from the third quarter of 2016. In addition, the same for Wolverine’s Heritage Group, Lifestyle Group, Boston Group and Multi-Brand Group are pegged at $85 million, $210 million, $203 million and $36.23 million, respectively. These estimates show a year-over-year decline of 1.1%, 4.2% and 55% for the Heritage Group, Lifestyle Group and Multi-Brand Group, correspondingly. However, the estimates for the Boston Group inched up 0.3% from the prior-year quarter.

Driven by the company’s strategies and robust earnings history, Wolverine’s shares have rallied 16.3% in the last six months, as against the industry’s decline of 7.5%.

Let’s take a sneak peek at Select Comfort Corporation SCSS, the leading manufacturer and marketer of beds and bedding accessories, which has been benefiting from its ongoing strategic initiatives. These strategies include brand innovations, direct-to-consumer distribution model, digital enhancement, and pricing power. Also, the company’s new marketing campaign — The Future of Sleep — is likely to raise demand for the 360 smart bed products. However, its weak retail comparable-store sales (comps) remain concerns. (Read: Is a Beat in Store for Select Comfort in Q3 Earnings?)

In fact, a look upon Select Comfort’s share price reveals that it has gained 22.9% in the last six months, as against the industry’s decline of 0.8%.

Select Comfort Corporation Price, Consensus and EPS Surprise

Select Comfort Corporation Price, Consensus and EPS Surprise | Select Comfort Corporation Quote

Additionally, the company is likely to beat earnings estimates this quarter with an Earnings ESP of +0.64 and a Zacks Rank #3. The Zacks Consensus Estimate for the third quarter is currently pegged at 68 cents, reflecting a year-over-year growth of about 21%. Further, the revenue consensus estimate for the impending quarter stands at $415.1 million, up 12.8% from the year-ago quarter.

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