Floor & Decor Holdings, Inc. Earnings Expected to Increase (FND): is it worth buying?

Floor & Decor Holdings, Inc. is expected to (FND) will report year-on-year earnings growth on higher revenues in its report for the quarter ended September 2019. This widely known consensus outlook paints a good picture of the company’s earnings picture, but comparing actual results to these estimates is an important factor that could impact the near-term share price.

The earnings report, due on November 1, 2019, could help stocks climb higher if these key numbers are better than expected. On the other hand, if they miss, the stock could fall.

While management’s discussion of operating conditions during the earnings conference call will have the greatest impact on the durability of the immediate price change and future earnings expectations, it is worth having insight into the likelihood of an upside earnings per share surprise.

Zacks Consensus Estimate

In its upcoming report, the company is expected to post quarterly earnings per share of $0.26, which would represent a year-over-year change of +8.3%.

Revenue is expected to be $524.37 million, up 20.3% from the same quarter last year.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised up 0.35% over the past 30 days to the current level. This is essentially a reflection of how the analysts covering the aggregate have reassessed their initial estimates during this period.

Investors should note that the aggregate change does not necessarily reflect the direction of estimate revisions by each major analyst.

Price, Consensus and EPS Surprise

Whisper about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. This insight is the basis of our proprietary surprise forecasting model, the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; The Most Accurate Estimate is a newer version of the Zacks Consensus EPS. The idea is that analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had previously predicted.

Thus, a positive or negative ESP reading theoretically indicates the likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

Please note that a negative Earnings ESP reading does not indicate a missed profit. Our research shows that it is difficult to predict earnings beats with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Ranks of 4 (Sell) or 5 (Strong Sell).

How the numbers stacked up for Floor & Decor Holdings, Inc.

For Floor & Decor Holdings, Inc., the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become optimistic about the company’s earnings prospects. This has resulted in an Earnings ESP of +0.78%.

On the other hand, the stock currently carries a Zacks Rank #3.

So this combination indicates that Floor & Decor Holdings, Inc. will most likely beat consensus EPS estimates.

Are the financial results surprising? Does history matter?

When calculating a company’s future earnings estimates, analysts often wonder how well it was able to match previous estimates. So it’s worth looking at the company’s surprise history to assess its impact on the upcoming number.

For the last reported quarter, it was expected that Floor & Decor Holdings, Inc. would post earnings of $0.30 per share when it actually produced earnings of $0.34, delivering a surprise of +13.33%.

The company has beaten consensus EPS estimates four times over the last four quarters.

Bottom Line

Beating or missing earnings may not be the only basis for a stock rising or falling. Many stocks lose ground despite beating gains due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks to beat earnings expectations increases your chances of success. Therefore, it is worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they go live.

Floor & Decor Holdings, Inc. seems like a compelling candidate for earnings outperformance. However, investors should look at other factors when betting on this stock or staying away from it ahead of its earnings release.

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