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The Zacks Analyst Blog Highlights: Costco Wholesale, Pacific Sunwear of California, Lululemon Athletica, Foot Locker and News Corp.

Zacks Equity Research

For Immediate Release

Chicago, IL – May 29, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Costco Wholesale Corporation (COST), Pacific Sunwear of California Inc. (PSUN), Lululemon Athletica Inc. (LULU), Foot Locker, Inc. (FL) and News Corporation (NWSA).

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Here are highlights from Tuesday’s Analyst Blog:

Will Costco Earnings Beat Estimate?

Costco Wholesale Corporation (COST) is slated to report its third-quarter fiscal 2013 results before the market opens on May 30, 2013. In the last quarter, it posted a positive surprise of 4.8%. Let’s see how things are shaping up for this announcement.

Factors This Past Quarter

The better-than-expected results were buoyed by growth in the top line due to rise in membership fees and improved sales of discretionary items, as consumers seeking discounts started flocking to warehouse clubs. The company’s strategy to sell products at heavily discounted prices has helped it to remain on the growth trajectory amid beleaguered economic conditions as cash-strapped customers continue to reckon Costco as a viable option for low-cost necessities. Having continued to deliver consistent comparable-store sales growth, Costco is well positioned in the warehouse club industry.

Earnings Whispers?

Our proven model does not conclusively show that Costco is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: ESP for Costco is 0.00%. This is because the Most Accurate Estimate remains in line with the Zacks Consensus Estimate of $1.02.

Zacks Rank #3 (Hold): Costco’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks That Warrant a Look

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

Pacific Sunwear of California Inc. (PSUN), Earnings ESP of +50.00% and a Zacks Rank #2 (Buy).

Lululemon Athletica Inc. (LULU), Earnings ESP of +3.33% and a Zacks Rank #2 (Buy).

Foot Locker, Inc. (FL), Earnings ESP of +1.14% and a Zacks Rank #2 (Buy).

News Corp. Board Clears Business Split

News Corporation (NWSA) recently announced that its board of directors has consented to the company’s earlier decision of splitting its operations into 2 separate publicly traded publishing and entertainment entities.

The diversification is expected to culminate on Jun 28, 2013. Alongside, the company announced the board members for the separated entities.

Post split, the Entertainment company (to be named 21st Century Fox) will encompass cable and television assets, filmed entertainment, and direct satellite broadcasting businesses including Fox broadcasting, cable network, Fox News Channel, the 20th Century Fox movie studio, BSkyB, Sky Italia, Sky Deutschland, and pay-TV operations in Europe and India.

Additionally, the Publishing company (to be known as News Corporation) will comprise publishing businesses, education unit and the integrated marketing services business, with brands like The Wall Street Journal, HarperCollins and Amplify.

With regards to the separation, the company announced that the shareholders of the company will receive one share in the new publishing company for every four shares they hold in the existing one. Moreover, to prevent unfavorable takeovers, News Corporation adopted a poison pill provision, which will be applicable for one year post split.

The split is expected to augur well for News Corporation, which has been in troubled waters since the revelation of the phone hacking scandal. In addition, it will definitely help the company improve its financials.

It is, however, apparent that the entertainment company with better prospects will have a greater chance of luring investors than the publishing entity, which is grappling with declining revenues.


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Read the analyst report on COST

Read the analyst report on PSUN

Read the analyst report on LULU

Read the analyst report on FL

Read the analyst report on NWSA

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