NCI Building (NCS) Q2 Earnings: Can The Stock Surprise?

NCI Building Systems Inc. (NYSE:NCS) is slated to report second-quarter fiscal 2016 results on May 31, after the closing bell. Its adjusted earnings skyrocketed 133% and sales rose 15% on a year-over-year basis in the first quarter of fiscal 2016.

Last quarter, the company recorded a positive earnings surprise of 250.00%. NCI Building, in fact, has a healthy track record with respect to earnings, having delivered positive surprises in three out of the trailing four quarters with an average beat of 51.57%.

Despite the impressive background, an earnings beat is not guaranteed this time around, as suggested by the Zacks model.

Here is what our model indicates:

The possibility of NCI Building beating the Zacks Consensus Estimate in the second quarter is rather low. This is because it lacks the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – that reflects the possibility of a positive earnings surprise.

Zacks ESP: Earnings ESP for NCI Building is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a breakeven.

Zacks Rank: Although NCI Building carries a Zacks Rank #3, the 0.00% ESP makes surprise prediction difficult.

Factors at Play

NCI Building expects the fiscal second quarter to be the eighth consecutive quarter of year-over-year improvement in gross profit margin and adjusted EBITDA. The company will continue to work on margin expansion through commercial discipline, manufacturing efficiencies and supply chain contributions.

Further, recent backlog trends are expected to support NCI Building’s revenues. At the end of the first quarter, order backlog was $478 million, up 6% year over year. However, volatile foreign currency and weak oil and gas markets will remain headwinds for the company in the near term.

Stocks to Consider

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 this quarter:

PulteGroup, Inc. (NYSE:PHM) has an Earnings ESP of +3.03% and a Zacks Rank #1.

Owens Corning (NYSE:OC) has an Earnings ESP of +1.19% and a Zacks Rank #3.

Simpson Manufacturing Co., Inc. (NYSE:SSD) has an Earnings ESP of +2.00% and a Zacks Rank #1.