Will Spectrum Brands (SPB) Miss Earnings? - Analyst Blog

Spectrum Brands Holdings Inc. SPB is scheduled to report its second-quarter fiscal 2014 results before the markets open on May 7. Last quarter, this global consumer products company posted a positive earnings surprise of approximately 6.86%. Let's see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Spectrum Brands' strong first-quarter fiscal 2014 performance was mainly driven by improved top lines that stemmed from the accretive Hardware & Home Improvement (HHI) business. Earnings also benefited from strong margins growth during the quarter.

On a segmental basis, Home & Garden and HHI segments contributed to sales growth, while sales at the Global Batteries & Appliances and Global Pet Supplies segment were an offset. The company remains optimistic of its fiscal-2014 performance, projecting sales growth at the rate of gross domestic product GDP compared with fiscal 2013 net sales.

Earnings Whispers?

Our proven model does not conclusively project Spectrum Brands as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:

Negative Zacks ESP: ESP (Expected Surprise Prediction) for Spectrum Brands is -2.70%. This is because the Most Accurate estimate stands at 72 cents, while the Zacks Consensus Estimate is pegged at 74 cents.

Zacks #3 Rank (Hold): Spectrum Brands' 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 a Zacks Rank #4 and #5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.

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:

Foot Locker Inc's FL Earnings ESP stands at +1.91% and it carries a Zacks Rank #2 (Buy).

Vitamin Shoppe Inc. VSI has an Earnings ESP of +1.47% and a Zacks Rank #3.

CST Brands Inc. CST with an Earnings ESP of +14.29% carries a Zacks Rank #3.