Will PetSmart (PETM) Miss Earnings Estimates? - Analyst Blog

PetSmart, Inc. PETM, one of the leading pet food and related services superstore, is slated to report its first-quarter 2014 earnings before the opening bell on May 21, 2014,. In the previous quarter, PetSmart recorded a positive earnings surprise of nearly 5.8%. Let's see how things are shaping up for this announcement.       

Factors Influencing this Quarter

The company's innovative and differentiated products, along with its sustained efforts to expand brand portfolio and assortments are the driving factors in the upcoming quarter. However, PetSmart faces competition from giants like Wal-Mart Stores Inc. WMT, which have lately penetrated the pet supply market. Hence, the company is focusing on online competition and enhancing customer relations in order to boost sales. For the first quarter, it envisions earnings before tax (EBT) to grow in the low to mid-single digit range.

Earnings Whispers

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

Zero Zacks ESP: PetSmart currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.02.

Zacks Rank: PetSmart's Zacks Rank #4 (Sell) lowers the predictive power of ESP.

We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

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:

The Kroger Co. KR, Earnings ESP of +0.95% and a Zacks Rank #2 (Buy).

Foot Locker, Inc. FL, Earnings ESP of +0.95% and a Zacks Rank #2.