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GNC Holdings (GNC) Q2 Earnings: Disappointment in the Cards?

GNC Holdings, Inc. GNC, a specialty retailer of health and nutrition related products, is scheduled to report second-quarter 2017 results on Jul 27, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 12.1%. However, GNC Holdings’ trailing four-quarter earnings average lagged the Zacks Consensus Estimate by 20.5%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

GNC Holdings' last reported first-quarter 2017 adjusted earnings per share (EPS) reflected a massive 46.4% year-over-year deterioration. Revenues in the quarter dropped 3.6% year over year. The dismal performance was primarily due to lower sales at the U.S. & Canada international and manufacturing/wholesale segments. Also, in the first quarter of 2017, gross margin and adjusted operating margin deteriorated. Hence, we expect a similar trend in the second quarter of 2017 as well.

GNC Holdings, Inc. Price and EPS Surprise

GNC Holdings, Inc. Price and EPS Surprise | GNC Holdings, Inc. Quote

Moreover, GNC Holdings has a number of tough competitors in the market that include large international pharmacy chains, major international supermarket firms and large U.S.-based companies with global operations. Thus, we expect the company to slash product prices in the face of stiff competition, which, in turn, may hurt margins.

Also, currency headwinds continue to be a growing concern for GNC Holdings. Management also expects the failure to comply with FTC regulations and changing consumer preferences to hamper business.

However, on the bright side, the performance of One New GNC was quite encouraging during the first quarter of 2017. Banking on it, we expect the company to continue to gain in the yet-to-be-reported quarter. Meanwhile, the launch of the PRO Access program has added members to the company’s customer base, which is expected to drive growth.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for GNC Holdings 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. That is not the case here, as you will see below.

Zacks ESP:  GNC Holdings has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 39 cents. You can uncover the best stocks to buy or sell before they’re reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.

Zacks Rank: GNC Holdings has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Becton, Dickinson and Company BDX has an Earnings ESP of +0.41% and a Zacks Rank #2. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link_invidea...">the complete list of today’s Zacks #1 Rank stocks here.

Align Technology, Inc. ALGN has an Earnings ESP of +1.37% and a Zacks Rank #2.

Stryker Corporation SYK has an Earnings ESP of +0.66% and a Zacks Rank #2.

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