Will Pacific Sunwear (PSUN) Disappoint on Earnings? - Analyst Blog

Pacific Sunwear of California Inc. PSUN, specialty retailer of apparel, accessories, and footwear, is set to report its first quarter fiscal 2014 results on May 29, 2014. Last quarter, it posted a positive surprise of 5.56%. Let us see how things are developing for this announcement.

Factors Influencing the Quarter

A difficult retail environment along with inclement weather (February and March) is likely to have a negative impact on Pacific Sunwear's first-quarter fiscal 2014 results. The company's streak of positive same store sales over the last 8 quarters was not enough to boost the compressed margins. Though the company has embarked on a performance turnaround, it is likely to be a time consuming affair.

Earnings Whispers

Our proven model does not conclusively project Pacific Sunwear as likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP:  ESP (Expected Surprise Prediction) for Pacific Sunwear is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 13 cents.

Zacks Rank: Pacific Sunwear's Zacks Rank #4 (Sell) when combined with a 0.00% ESP makes surprise prediction unlikely. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

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

Bank of Montreal BMO with an Earnings ESP of +0.73% holds a Zacks Rank #3.

The Bank of Nova Scotia BNS with an Earnings ESP of +1.67% holds a Zacks Rank #3.

Lions Gate Entertainment Corp. LGF has an Earnings ESP of +2.56% and a Zacks Rank #3.