Will Higher Promotions Dent Finish Line's (FINL) Q2 Earnings?

The Finish Line, Inc. (NASDAQ:FINL) is slated to release second-quarter fiscal 2018 results on Sep 22. The question lingering in investors’ minds is whether this specialty retailer of athletic footwear, activewear and accessories will be able to post a positive earnings surprise in the quarter to be reported. Well, Finish Line's bottom line lagged the Zacks Consensus Estimate in the trailing four quarters, by an average of 14.5%. This seems to be the reason as why the company has slumped 42.8% so far this year, wider than the industry’s 22.8% decline. So, 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 pegged at 11 cents, which is way below the year-ago period figure of 55 cents. Moreover, we note that the Zacks Consensus Estimate has declined sharply over the past 30 days. Additionally, analysts polled by Zacks expect revenues of roughly $470.5 million, down 7.6% from the year-ago quarter.

Factors at Play

Finish Line recently posted disappointing preliminary numbers for the second quarter, which compelled management to lower its guidance for fiscal 2018. Management stated that the athletic space witnessed intense promotional activities in the quarter, which weighed upon sales and gross margin. Sales in the quarter dropped 3.3% to $469.4 million owing to a 4.6% fall in comparable store sales (comps). Further the gross margin remained pressurized on account of soft sales and greater markdowns. Consequently, the company envisions the second-quarter earnings to lie in a band of 8-12 cents per share. The company expects the retail space to remain extremely competitive and promotional in the remainder of fiscal 2018.

While Finish Line remains committed toward effective inventory and expense management, and developing omni-channel capacities, the aforementioned hurdles make us apprehensive about the company’s upcoming results.

What the Zacks Model Unveils?

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

Finish Line currently has an Earnings ESP of 0.00%, as the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 11 cents. Further, the company carries a Zacks Rank #4 (Sell). Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions. The combination of Finish Line’s unfavorable Zacks Rank and Earnings ESP of 0.00% makes surprise prediction difficult.

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:

Constellation Brands, Inc. (NYSE:STZ) has an Earnings ESP of +0.99% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Build-A-Bear Workshop, Inc. (NYSE:BBW) has an Earnings ESP of +13.79% and a Zacks Rank #2.

Whirlpool Corporation (NYSE:WHR) has an Earnings ESP of +8.67% and a Zacks Rank #3.

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