Is A Beat In Store For Select Comfort (SCSS) In Q3 Earnings?

Select Comfort Corporation (NASDAQ:SCSS) is set to report third-quarter 2017 results on Oct 17, after the closing bell.

Currently, the question lingering in investors’ minds is, whether the company will be able to deliver positive earnings surprise in the to-be-reported quarter. Select Comfort’s earnings have outpaced the Zacks Consensus Estimate in the last two quarters, with the trailing four-quarter average beat of 24.5%.

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

What to Expect?

The Zacks Consensus Estimate for the quarter under review has been stable at 68 cents in the last 30 days, while the same has moved up by a penny to $1.40 for 2017. Notably, these estimates reflect a year-over-year growth of about 21% for the impending quarter and 27% for the current year.

Further, analysts polled by Zacks expect revenues of $415.1 million and $1.43 billion for the third quarter and 2017, up 12.8% and 8.9%, respectively.

Select Comfort forms part of the Consumer Discretionary sector, which is currently placed at the bottom 38% (10 out of 16) of the Zacks classified sectors. Also, we observed that the sector has gained 16.7% in a year, below the S&P 500’s growth of 19.3%.

Per the Earnings Outlook, total earnings for the sector are expected to decline marginally by 1.9%, while revenues are projected to improve 2.9%. As per the report, 5.6% of the total S&P 500 companies in the sector have already reported their financial numbers. Notably, all the companies in the sector delivered positive earnings surprises and also surpassed the top-line expectations.

What Does the Zacks Model Unveil?

Our proven model conclusively shows that Select Comfort 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. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Select Comfort has an Earnings ESP of +1.38% with a Zacks Rank #3. This increases the predictive power of ESP, thus making us confident of an earnings beat.

Factors Likely to Impact the Quarter

Select Comfort has been benefiting from its ongoing strategic initiatives such as brand innovations, direct-to-consumer distribution model, digital enhancement, and pricing power. Meanwhile, the company remains focused on its new marketing campaign — The Future of Sleep — that is expected to raise demand for the company’s 360 smart bed products.

In fact, these initiatives are well reflected in the company’s share price that surged 50.3% in a year, substantially outperforming the industry’s gain of 15.4%.

Evidently, sales in the second quarter rose 3% year over year. Also, management stated that demand in the reported quarter was ahead of the company’s expectation and store traffic was steady throughout the quarter as well.

Though traffic at the stores were consistent, retail comparable-store sales (comps) declined 6% during the second quarter. Also, the company-controlled comps decreased 4% year over year. However, comps for 2017 are anticipated to increase by low-single digits. Furthermore, management reiterated its earnings guidance for 2017 that is anticipated in the band of $1.25-$1.50, which is up from $1.10 reported in 2016.

Stocks With Favorable Combination

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:

G-III Apparel Group, Ltd. (NASDAQ:GIII) has an Earnings ESP of +1.20% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren Corporation (NYSE:RL) has an Earnings ESP of +1.31% and a Zacks Rank #2.

PVH Corp. (NYSE:PVH) has an Earnings ESP of +0.23% and a Zacks Rank #2.

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