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Factors Likely to Decide Dillard's (DDS) Fate in Q3 Earnings

Zacks Equity Research

We expect Dillard's, Inc. DDS to continue witnessing a year-over-year decline in the bottom line when it reports third-quarter fiscal 2019 numbers.

In the last reported quarter, the Arkansas-based departmental store chain delivered a negative bottom-line surprise of 163.6%. Further, its bottom line missed estimates by 50.1%, on average, over the trailing four quarters.

Coming to projections for the quarter under review, we note that the Zacks Consensus Estimate for the company’s bottom line is pegged at loss of 29 cents, whereas it reported earnings of 27 cents in the year-ago period. Notably, the estimate of loss has widened by a penny in the past 30 days. For revenues, the consensus mark stands at $1.40 billion, suggesting a 3.5% decline from the year-ago quarter’s reported figure.

Dillard's, Inc. Price and EPS Surprise


Dillard's, Inc. Price and EPS Surprise

Dillard's, Inc. price-eps-surprise | Dillard's, Inc. Quote

Key Factors to Note

High inventory levels have been affecting Dillard’s performance for a few years. This has led to soft gross margin and increased markdowns, which have been hurting top and bottom lines.

The company’s fiscal third-quarter results are likely to reflect the impact of elevated operating expenses due to rise in SG&A expenses. Moreover, stiff competition in the industry might have been a drag.

However, the benefit from increasing productivity at existing stores, developing a leading omni-channel platform and enhancing domestic operations are likely to have worked in its favor. Moreover, the enhancement of merchandise assortments within the company’s e-commerce business is anticipated to have aided the top line.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Dillard’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Dillard’s carries a Zacks Rank #3, its Earnings ESP of -70.46% makes surprise prediction difficult.

3 Stocks With Favorable Combination

Here are three companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Target Corp. TGT currently has an Earnings ESP of +3.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart Inc. WMT presently has an Earnings ESP of +0.83% and a Zacks Rank #2.

The Home Depot Inc. HD currently has an Earnings ESP of +0.23% and a Zacks Rank #2.

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