Will Aeropostale (ARO) Disappoint This Earnings Season?

Zacks

Aeropostale, Inc. (ARO) is slated to report third-quarter fiscal 2013 results on Dec 4, 2013. In the previous quarter, it posted a negative surprise of 41.7%. Let's see how things are shaping up for this announcement.

Factors in the Past Quarter

Aeropostale’s dismal second-quarter fiscal 2013 results were mainly due to weak traffic and higher promotional expenses. Additionally, macroeconomic headwinds and increased inventory levels were a drag on the company’s top-line growth.

Earnings Whispers?

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

Negative Zacks ESP: ESP for Aeropostale is -8.00%. This is because the Most Accurate Estimate stands at a loss of 27 cents and the Zacks Consensus Estimate stands at a loss of 25 cents.

Zacks Rank #5 (Strong Sell): Aeropostale’s Zacks Rank #5 (Strong Sell) and a negative ESP make surprise prediction difficult. 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.

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:  

Five Below, Inc. (FIVE) with Earnings ESP of +25.0% and Zacks Rank #2 (Buy)

The Kroger Co. (KR) with Earnings ESP of +1.89% and Zacks Rank #2 (Buy)

Costco Wholesale Corporation (COST) with Earnings ESP of +0.97% and Zacks Rank #3 (Hold)

Read the Full Research Report on KR
Read the Full Research Report on ARO
Read the Full Research Report on COST
Read the Full Research Report on FIVE


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