Will Lumber Liquidators' (LL) Q3 Earnings Miss Estimates? - Analyst Blog

Lumber Liquidators Holdings, Inc. (LL), a specialty retailer in the home improvement services industry, is set to report its third-quarter 2014 results on Oct 22, 2014. Last quarter, it posted in-line earnings. Let us see how things are developing for to this announcement.

Factors Affecting the Quarter

Lumber Liquidators' first two quarters were marred by weather and out-of-stock inventory issues. Inventory levels fell as the company took time for new vendor compliance procedures and transition issues. Nevertheless, things have started to improve in the third quarter and it is likely that the company will be able to replenish inventory fully by this fall. Moreover, with macroeconomic factors starting to ease, there seems to be plenty of upside potential for sales and margins.

However, these positives are likely to take time to manifest into solid financial numbers. Hence, we maintain a cautious stance for this quarter.

Earnings Whispers

Our proven does not conclusively project Lumber Liquidators 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 for Lumber Liquidators is -1.47%. This is because the Most Accurate estimate stands at 67 cents and the Zacks Consensus Estimate stands at 68 cents.

Zacks Rank: Lumber Liquidators' Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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:

L Brands, Inc. (LB) has an Earnings ESP of +3.13% and a Zacks Rank #2.

Under Armour, Inc. (UA) has an Earnings ESP of +2.50% and a Zacks Rank #2.

The Home Depot, Inc. (HD) has an Earnings ESP of +0.89% and a Zacks Rank #2.