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Will Citi Trends (CTRN) Surpass Earnings Estimates in Q1?

Citi Trends Inc. CTRN is slated to report first-quarter fiscal 2016 results on May 18, before the opening bell. In the last quarter, the company reported a negative surprise of 14.3%.

Also, this off-price apparel retailer missed the Zacks Consensus Estimate in three of the last four quarters. Nevertheless, the company delivered an average positive earnings surprise of 1.96%. Let’s see how things are shaping up for this announcement.



Factors Influencing this Quarter

Following a dismal performance in the fourth quarter of fiscal 2015, the company’s outlook for the sales trend in the fiscal first quarter improved in the latter part of February following the announcement of tax refunds. The company expects this momentum to continue throughout the quarter, with projections of flat comps. Further, a favorable response to spring merchandise and strength seen in the Home division encourages management to strive for positive comps growth in each quarter of fiscal 2016.

Also, the company should benefit from progress on strategic initiatives like better utilization of floor area, improvisation of merchandise margins and inventory management. Moreover, the company’s strong balance sheet and cash flow generation ability, which highlight its commitment toward shareholders, bode well.

With all these factors at play, we would like to wait and see what’s in store for Citi Trends for the upcoming release.

Earnings Whispers

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

Zacks ESP: Earnings ESP for Citi Trends is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 74 cents.

Zacks Rank: Citi Trends carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

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

Stocks that Warrant a Look

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

Lowe's Companies Inc. LOW, scheduled to report earnings on May 18, has an Earnings ESP of +2.41% and a Zacks Rank #3.

Best Buy Co. Inc. BBY, scheduled to report earnings on May 24, has an Earnings ESP of +2.94% and a Zacks Rank #2 (Buy).

DSW Inc. DSW, scheduled to report earnings on May 24, has an Earnings ESP of +2.17% and a Zacks Rank #3.

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