GameStop (GME) Q3 Earnings: Stock Likely To Disappoint?

GameStop Corp. (NYSE:GME) is slated to report third-quarter fiscal 2016 results on Nov 22, after the closing bell. In the previous quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 3.9%.

Notably, in three out of the last four quarters, the company surpassed the Zacks Consensus Estimate with a positive earnings surprise of 2.6%. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that GameStop is likely to beat earnings estimates this quarter. This 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. This is not the case here as GameStop’s Earnings ESP is 0.00% with both the Most Accurate estimate and the Zacks Consensus Estimate pegged at 47 cents.

Further, GameStop carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Influencing this Quarter

Recently, GameStop Corporation trimmed its third-quarter as well as fiscal 2016 projection. The company cited soft sales of new video games as well as the current sell-through rate of new video game hardware as the reason behind lowering its outlook. Management now envisions third-quarter sales to be $2 billion, flat year over year. Same store sales are expected to decline in the range of 6% to 7% in the third quarter. Earlier, the company had projected sales growth of 2% to 5%, while same-store sales were anticipated to range between a 2% decline and a 1% increase. GameStop now foresees third-quarter earnings to be in the band of 45 cents to 49 cents. Previously, GameStop expected to report earnings between 53 cents and 58 cents.

The video game industry is highly competitive, and shoppers now have many alternatives to choose from when it comes to software, hardware and game accessories for their video game consoles and personal computers.

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:

Hibbett Sports, Inc. (NASDAQ:HIBB) has an Earnings ESP of +4% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +6.06% and a Zacks Rank #3.

Dollar Tree, Inc. (NASDAQ:DLTR) has an Earnings ESP of +1.28% and a Zacks Rank #3.

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