GNC Holdings (GNC) Q1 Earnings: Disappointment In Store?

GNC Holdings, Inc. (NYSE:GNC) – a specialty retailer of health and nutrition related products – is scheduled to report first-quarter 2017 financial results on Apr 18, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 81.08%. GNC Holdings’ trailing four-quarter average earnings also lagged the Zacks Consensus Estimate by 25.51%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

GNC Holding’s last reported fourth quarter of 2016 was quite a disappointing one. This debacle was because of the old model, characterized by complex non-competitive pricing and ineffective loyalty program. Not only did the company lag in the domestic market, its overseas operating results were equally disappointing. Although the company has announced its ‘One New GNC’ plans which will focus on new products and pricing structure at the stores, any near-term progress is uncertain.

Meanwhile, the nutritional supplements industry is characterized by rapid and frequent changes in demand for products and new product introduction. Moreover, GNC Holdings has a number of tough competitors in the market that include large international pharmacy chains, major international supermarket firms and large U.S.-based companies with global operations. Thus, we expect the company to slash product prices in the face of stiff competition, which in turn may hurt margins going ahead.

Further, currency headwinds continue to be a growing concern for GNC Holdings. Management also expects the failure to comply with FTC regulations and changing consumer preferences to hamper business.

On the bright side, GNC Holdings has been performing well in China for quite some time. The company is also currently striving to regain its emerging market hold, particularly in Mexico and Turkey. Going ahead, management expects to continue capitalizing on international revenue growth opportunities through the addition of franchise stores, expansion into new high-growth markets and growth of product distribution in the emerging markets

Stock Performance

We also take a note that GNC Holding has been trading below the Zacks categorized Retail - Pharmacies and Drug Stores industry over the last three months. Currently, the stock is down 32.4%, wider than the 6.0% decline of the broader industry. The absence of guidance for 2017 is also disappointing as it extinguishes hopes of recovery anytime soon.

The company’s estimate revision trend is also discouraging. For the current quarter, GNC Holding saw no upward or downward movement in estimates for the last one month. Also, the magnitude of the trend has remained steady at 33 cents over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that GNC Holdings is likely to beat earnings this quarter. That 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. That is not the case here, as you will see below.

Zacks ESP: GNC Holdings has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 33 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GNC Holdings has a Zacks Rank #5 (Strong Sell). Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Galectin Therapautics, Inc. (NASDAQ:GALT) has an Earnings ESP of +13.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom Holdings Inc (NYSE:HRC) has an Earnings ESP of +1.27% and a Zacks Rank #2.

Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) has an Earnings ESP of +3.85% and a Zacks Rank #2.

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