Will Finish Line (FINL) Q1 Earnings Disappoint Investors?

The Finish Line, Inc. (NASDAQ:FINL) is slated to release first-quarter fiscal 2018 results on Jun 23. The question lingering in investors’ minds is whether this apparel, shoes and accessories retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

The company delivered a negative earnings surprise of 28.9% in the last reported quarter and has lagged the Zacks Consensus Estimate by an average of 13.4% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 23 cents, reflecting a year-over year growth of 0.4%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. However, analysts polled by Zacks expect revenues of $431.8 million, reflecting a drop of 4.8% from the year-ago quarter.

Factors at Play

Finish Line has underperformed the Zacks categorized Retail – Apparel/Shoe industry over the last six months largely due to its unimpressive earnings surprise history. The company’s shares have plunged 35%, compared with the industry’s decline of 22.8% in the said time frame.



The company ended fiscal 2017 on a dismal note as the fourth-quarter results lagged expectations. Results were impacted by delayed tax refunds which hurt comps along with pressurized product margins. Also, soft traffic compelled the company to undertake aggressive pricing which in turn led to intense competition. Further, the company’s products are unable to meet consumers’ demands, especially in the running and basketball categories.

Finish Line is undertaking efforts to improve its operational performance and is in talks with vendors to enhance its merchandise. Also, the company is making efforts to grow its digital business. However, the aforementioned hurdles and current scenario make us cautious regarding the stock. While the company is focused on cost-management, it expects SG&A expense deleverage in fiscal 2018. Also, the company expects effective tax rate to increase 200 bps from last year which is likely to hurt the bottom line. These factors clearly raise concerns, making us apprehensive about the upcoming results.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Finish Line 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 can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Finish Line currently carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions. Additionally, the company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 23 cents. The combination of Finish Line’s Zacks Rank #4 and ESP of 0.00% makes surprise prediction difficult.

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:

Darden Restaurants, Inc. (NYSE:DRI) has an Earnings ESP of +1.74% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tupperware Brands Corporation (NYSE:TUP) has an Earnings ESP of +0.83% and a Zacks Rank #2.

Philip Morris International Inc (NYSE:PM) has an Earnings ESP of +2.44% and a Zacks Rank #3.

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