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Francesca's (FRAN) to Post Q3 Earnings: What's in the Cards?

Francesca's Holdings Corporation FRAN is expected to report third-quarter fiscal 2018 results on Dec 4. In the trailing four quarters, it has underperformed the Zacks Consensus Estimate by an average of 35.4%. In the last reported quarter, this Texas-based company delivered a negative earnings surprise of 75%.

Which Way are Top- & Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 4 cents compared with earnings of a cent reported in the year-ago quarter. We note that the Zacks Consensus Estimate has moved up by a penny in the past 30 days. The Zacks Consensus Estimate for revenues is $105.2 million, almost flat year over year. We note that total revenues of this company had decreased 5.6% in the last reported quarter.

Francesca's Holdings Corporation Price and EPS Surprise

Francesca's Holdings Corporation Price and EPS Surprise | Francesca's Holdings Corporation Quote

Factors to Consider

Francesca's has been witnessing top-line declines for a while now. In the second quarter of fiscal 2018, sales dipped 6%, owing to soft store traffic that slumped low-double digits. Apart from this, declining comparable sales (comps) hurt the top line in the last quarter. In the second quarter of fiscal 2018 comparable sales decreased 13% due to the decline in both boutique traffic and conversion rate. The Zacks Consensus Estimate for comparable sales shows a decline of 6.5%. Despite such downsides, the company’s omni-channel initiatives have borne fruit as its e-commerce business is growing at a double-digit rate.

For the third quarter, the company projects sales of $105-$110 million and comps to decline 3-8%. Further, SG&A expenses are expected to increase 4-6%, which may pose a threat to the company’s margin.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Francesca's is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Francesca's has a Zacks Rank #4 (Sell) but an Earnings ESP of +14.29%.

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

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

Casey General Stores, Inc. CASY has an Earnings ESP of +6.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholeasale Corporation COST has an Earnings ESP of +3.09% and a Zacks Rank #3.

Zumiez Inc. ZUMZ has an Earnings ESP of +0.69% and a Zacks Rank #3.

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