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Here's How The Michaels (MIK) is Placed Ahead of Q4 Earnings

·4 min read

The Michaels Companies, Inc. MIK is slated to report fourth-quarter fiscal 2020 results on Mar 4, before the opening bell. The leading arts and crafts specialty retailer in North America is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2020 numbers.

The Zacks Consensus Estimate for the company’s fiscal fourth-quarter earnings is pegged at $1.46, which suggests an improvement of 15.9% from $1.26 reported in the year-ago quarter. Notably, the consensus mark has been unchanged in the past 30 days. The consensus estimate for fiscal fourth-quarter sales is pegged at $1.82 billion, indicating 5.4% growth from the prior-year quarter’s reported number.

The company delivered a positive earnings surprise of 45.8% in the last reported quarter. Moreover, the bottom line beat estimates by 54.1%, on average, in the trailing four quarters.

The Michaels Companies, Inc. Price, Consensus and EPS Surprise

The Michaels Companies, Inc. Price, Consensus and EPS Surprise
The Michaels Companies, Inc. Price, Consensus and EPS Surprise

The Michaels Companies, Inc. price-consensus-eps-surprise-chart | The Michaels Companies, Inc. Quote

Factors to Note

The Michaels’ has been benefiting from expanded omni-channel capabilities, customized marketing strategy and Maker-centric branding. The e-commerce channel has been witnessing significant growth, driven by improved omni-channel capabilities like BOPIS, curbside pick-up and same-day delivery. Also, strength in the core arts and crafts business has been contributing to growth. Further, robust demand in both stores and e-commerce has been aiding comparable store sales. The persistence of the trends is expected to have aided performance in the fiscal fourth quarter.

In the last reported quarter’s earnings call, management pointed out that the exiting fiscal third-quarter sales trend of mid-single-digit growth is likely to continue in the fourth quarter. This indicates continued sales growth in the fiscal fourth quarter.

Additionally, the company has been progressing well with efforts to manage inventory, streamline store operations, and maintain a disciplined approach to pricing and promotions. These traits are anticipated to have led to top-line improvement and gross margin growth in the to-be-reported quarter.

However, margins remain an area to watch. Impacts of costs associated with digital fulfillment and COVID-related expenses cannot be ruled out. We note that the impacts of higher SG&A expenses due to compensation-related expenses and salary hikes related to several initiatives undertaken in recent times to drive sales are likely to get reflected in the operating margin.

Zacks Model

Our proven model does not conclusively predict an earnings beat for The Michaels 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.

The Michaels has a Zacks Rank #3 but an Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

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

Dollar Tree, Inc. DLTR currently has an Earnings ESP of +1.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods, Inc. DKS presently has an Earnings ESP of +3.70% and a Zacks Rank #2.

Dollar General Corporation DG currently has an Earnings ESP of +1.23% and a Zacks Rank #3.

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