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Can Zumiez (ZUMZ) Surprise This Earnings Season?

Zacks Equity Research

Zumiez Inc. (ZUMZ) is set to report third-quarter fiscal 2013 results on Dec 5. Last quarter, it posted a 17.7% positive surprise. Let us see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Solid top-line growth, inflated margins and higher comparable store sales (comps) led to the earnings beat in the past quarter. Comps in the quarter benefited from improvement in the juniors, hard goods, and footwear categories, offset by decline in the men's, accessories, and boy's categories. Furthermore, we remain impressed by the company’s initiatives such as store opening programs and the recent acquisition of Blue Tomato, which provided it with a solid platform to capitalize on emerging opportunities.

Earnings Whispers?

Our proven model does not conclusively project Zumiez to likely beat earnings this quarter. A stock needs to have both positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:
Zacks ESP: ESP for Zumiez is 0.00% since the Most Accurate estimate stands at 46 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks #3 Rank (Hold): Zumiez’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is undergoing negative estimate revisions.

Other Stocks to Consider

Zumiez is not the only firm we are looking up to this earnings season. Our model shows that the following stocks have the right combination to post an earnings beat:

Omega Protein Corp. (OME) with Earnings ESP of +16.00% and a Zacks Rank #1 (Strong Buy)

Five Below Inc. (FIVE) with Earnings ESP of +25.00% and a Zacks Rank #2 (Buy)

Rite Aid Corp. (RAD) with Earnings ESP of +25.00% and a Zacks Rank #3 (Hold)

Read the Full Research Report on RAD
Read the Full Research Report on ZUMZ
Read the Full Research Report on FIVE
Read the Full Research Report on OME

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