What to look for

Big Lots (BIG) is expected to report a year-over-year profit decline on lower revenues when it reports for the quarter ended April 2024. This widely known consensus forecast paints a good picture of the company’s earnings picture, but how actual results compare to these estimates is an important factor that could impact the near-term share price.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on June 6. On the other hand, if these key numbers are not met, the stock could fall.

While the sustainability of the immediate price movement and future earnings expectations will largely depend on management’s discussion of business conditions during the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The discount retailer is expected to report a quarterly loss of $4.23 per share in its upcoming report, representing a year-over-year change of -24.4%.

Revenue is expected to be $1.04 billion, down 7.4% from the year-ago quarter.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised 7.3% down to the current level over the last 30 days. This generally reflects how the analysts covering a given study collectively re-evaluated their initial estimates during this period.

Investors should note that the direction of each analyst’s estimate revisions will not always be reflected in the aggregate change.

Whisper about earnings

Revisions to estimates prior to a company’s earnings release provide an indication of business conditions in the period in which the earnings are expected to be released. This insight is at the heart of our proprietary surprise prediction model, the Zacks Earnings ESP.

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

The story continues

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 mean a loss of earnings. Our research shows that it is difficult to predict earnings growth with any degree of confidence for stocks with negative ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How have the numbers changed for large parties?

Large Lots Most Accurate Estimates are higher than the Zacks Consensus Estimate, suggesting analysts have recently become optimistic about the company’s earnings prospects. This translated into an earnings ESP of +0.87%.

On the other hand, the stock currently sports a Zacks Rank of #4.

Thus, this combination makes it difficult to clearly predict that large parties will exceed the consensus EPS estimate.

Does the history of surprising results have any clue?

When calculating estimates of a company’s future earnings, analysts often consider how well the company has been able to match previous estimates. So it’s worth taking a look at the surprise history to gauge its impact on the upcoming issue.

For the last quarter, it was expected that Big Lots would post a loss of $0.12 per share when it actually produced a loss of $0.28, delivering a surprise of -133.33%.

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

Bottom line

Improving or lacking earnings may not be the only basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

That said, betting on stocks that are expected to exceed earnings expectations increases your chances of success. Therefore, it is worth checking the company’s Earnings Rank and Zacks Rank before their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

Big Lots doesn’t seem like a compelling candidate for profit beating. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

Expected results of an industry player

Dollar Tree (DLTR), another stock in the Zacks Retail – Discount Stores industry, is expected to post earnings per share of $1.43 for the quarter ended April 2024. These estimates indicate a year-over-year change of -2.7%. Revenue for the quarter is expected to be $7.63 billion, up 4.2% from the same quarter last year.

The consensus EPS estimate for Dollar Tree has been revised 1.8% down to the current level over the last 30 days. However, the higher most accurate estimate resulted in an earnings ESP of 0.16%.

This Earnings ESP combined with the Zacks Rank #3 (Hold) suggests that Dollar Tree is likely to outperform the consensus EPS estimate. Over the last four quarters, the company has topped EPS estimates only once.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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