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Is a Beat in the Cards for GameStop (GME) in Q4 Earnings?

Zacks Equity Research
Updated

GameStop Corp. GME is expected to report fourth-quarter fiscal 2017 results on Mar 28. In the preceding quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 25.6%. In the trailing four quarters, it delivered a positive earnings surprise of 13%. Let’s see how things are shaping up prior to this announcement.

Factors at Play

GameStop’s top line is likely to improve 7% year over year to $3,253 million in the fourth quarter backed by robust holiday sales. Per management, the sturdy holiday performance can be attributed to rise in sales of Nintendo Switch and Xbox One X. Also, collectibles business was strong during the period. The company generated total global sales of $2.77 billion for the nine-week holiday period (ended Dec 30, 2017), up 10.6% year over year. Comps increased 11.8%, reflecting a gain of 13.7% and 7.9% in the United States and internationally, respectively.

While collectibles sales during the holiday period witnessed a sharp gain of 19.1%, revenues from Technology Brands declined 18.6% on shortage of iPhone 10 supply and AT&T changes to compensation structure in 2017.

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However, on the earnings front, the company might not impress investors. For the to-be-reported quarter, the Zacks Consensus Estimate is pegged at $1.96, reflecting a year-over-year decrease of 17.7%. Moreover, management had earlier stated that given the product category sales mix during the festive season, it now anticipates adjusted earnings per share near the middle of its previous guidance range of $3.10-$3.40 for fiscal 2017.

GameStop Corp. Price, Consensus and EPS Surprise

GameStop Corp. Price, Consensus and EPS Surprise | GameStop Corp. Quote

What Does the Zacks Model Say?

Our proven model shows that GameStop is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

GameStop’s Earnings ESP of +3.57% and a Zacks Rank #3 make us reasonably confident of an earnings beat.

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:

Guess', Inc. GES has an Earnings ESP of +2.19% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place, Inc. PLCE has an Earnings ESP of +0.40% and a Zacks Rank of 3.

Lululemon Athletica Inc. LULU has an Earnings ESP of +1.30% and a Zacks Rank #3.

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lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Children's Place, Inc. (The) (PLCE) : Free Stock Analysis Report
 
GameStop Corp. (GME) : Free Stock Analysis Report
 
Guess?, Inc. (GES) : Free Stock Analysis Report
 
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Zacks Investment Research