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Will Lumber Liquidators (LL) Miss Q2 Earnings This Season?

Zacks Equity Research

Lumber Liquidators Holdings, Inc. (LL), a specialty retailer of hardwood flooring, is slated to report its second-quarter 2014 earnings on Jul 30, before the opening bell. In the previous quarter, Lumber Liquidators recorded a negative earnings surprise of 22.2%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Lumber Liquidators’ dismal first-quarter earnings were a result of adverse weather. For this quarter, the company – which competes with Lowe's Companies Inc. (LOW) – expects a gross margin contraction along with a rise in selling, general and administrative expenses, to the reasons being unfavorable sales mix and greater advertising, legal, professional and occupancy costs. So far in this quarter, the company has witnessed weak consumer traffic and it anticipates the trend to continue, besides encountering macroeconomic headwinds and inclement weather.

Earnings Whispers

Our proven model does not conclusively show that Lumber Liquidators is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) 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: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 60 cents.

Zacks Rank: Lumber Liquidators carries a Zacks Rank #5 (Strong Sell). 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:

Citi Trends, Inc. (CTRN), Earnings ESP of +6.90% and a Zacks Rank #1 (Strong Buy).

Advance Auto Parts Inc. (AAP), Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).

Read the Full Research Report on LL
Read the Full Research Report on LOW
Read the Full Research Report on AAP
Read the Full Research Report on CTRN


Zacks Investment Research