Will Black Diamond (BDE) Disappoint This Earnings Season?

Black Diamond, Inc. (NASDAQ:BDE) is scheduled to report first-quarter 2017 numbers on May 8, after market close.

Last quarter, this manufacturer and distributor of outdoor recreation equipment and active lifestyle products posted an 83.33% earnings miss. In fact, the company lagged estimates in three of the trailing four quarters, bringing the average negative surprise to 2.08%.

Black Diamond, Inc. Price and EPS Surprise

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

Factors at Play

This sporting goods company’s strategies like streamlining of manufacturing processes and overhead cost reduction should boost the quarter’s performance. Meanwhile, healthy demand for the company’s climbing and mountain equipment across all geographic regions, particularly in North America, should drive first-quarter results.

Moreover, Black Diamond’s independent global distributor business is likely to experience growth in the quarter, particularly in the large Asian markets. Solid execution with preseason orders, healthier inventory levels in several key markets, and efforts to encourage distributors to increase the company’s brand presence within retailers are expected to be driving factors, as has been the case.

However, the company has been reporting a year-over-year decline in sales and gross margin primarily due to negative currency translations, a trend not likely to change in the to-be-reported quarter. Meanwhile, scaling back of its apparel line could also weigh on sales.

In fact, a tough retail environment is also likely to further keep revenues under pressure. In addition, higher costs associated with strategic initiatives and the manufacturing activities that Black Diamond has repatriated from China to the U.S. might further impact gross margin.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Black Diamond 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, which is not the case here, as you will see below.

Zacks ESP: Black Diamond has an Earnings ESP of -100.00%. This is because the Most Accurate estimate is at break-even earnings, while the Zacks Consensus Estimate is pegged higher at 1 cent per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Black Diamond has a Zacks Rank #5 (Strong Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks to Consider

Here are some companies in the broader consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has an Earnings ESP of +9.68% and a Zacks Rank #3.

Norwegian Cruise Line Holdings, Inc. (NASDAQ:NCLH) has an Earnings ESP of +2.70% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marriott International, Inc. (NASDAQ:MAR) has an Earnings ESP of +1.11% and a Zacks Rank #3.

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