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Staples (SPLS) to Post Q2 Earnings: Can it Pull a Surprise?

Staples, Inc. SPLS is expected to report second-quarter fiscal 2017 results on Aug 16. In the previous quarter, the company had reported in-line earnings. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Stapleswill be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 12 cents, flat year over year. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks expect revenues of $3,833 million, declining over 19% from the year-ago quarter.

Factors at Play

Staples which has accepted the buyout offer of Sycamore Partners is likely to gain from its decision to streamline operations to enhance productivity and performance in North America by expanding services, strengthening customer base, shutting down underperforming stores along with decreasing fixed costs.

With respect to the cost containment efforts, management is employing a more efficient customer coverage model, focusing on lowering indirect procurement costs, enhancing supply chain and increasing mix of Staples’ brand products.

However, stiff competition and sluggish demand for paper-based office products due to technological advancements remain major woes for Staples. Decline in sales have also been a concern for the company. In the first quarter of fiscal 2017, sales declined 4.9% year over year. We noted that the sales have declined 3.1%, 3.7%, 4.3% and 2.9% in the first, second, third and fourth quarters of fiscal 2016, respectively.

Staples, Inc. Price, Consensus and EPS Surprise


Staples, Inc. Price, Consensus and EPS Surprise | Staples, Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Staples is likely to beat estimates this quarter. This 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. Staples has an Earnings ESP of 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 12 cents.

Staples carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

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:

The Gap, Inc. GPS has an Earnings ESP of +3.85% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wal-Mart Stores, Inc. WMT has an Earnings ESP of +0.94% and a Zacks Rank #2.

Burlington Stores, Inc. BURL has an Earnings ESP of +6.00% and a Zacks Rank #2.

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Gap, Inc. (The) (GPS): Free Stock Analysis Report
Wal-Mart Stores, Inc. (WMT): Free Stock Analysis Report
Burlington Stores, Inc. (BURL): Free Stock Analysis Report
Staples, Inc. (SPLS): Free Stock Analysis Report
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