Foot Locker Inc. (NYSE:FL) is set to report FQ4 2014 earnings before the market opens Friday, March 7th. Foot Locker is a sportswear and sneaker retailer that operates in about 20 countries worldwide. This past holiday season, which is included in Foot Locker’s FQ4, was marked by poor retail sales across the board. Many retailers blamed the harsh weather, particularly snowstorms and extreme cold, for the weaker than expected revenue numbers. This quarter, Wall Street is expecting Foot Locker to report 4% increased sales compared to FQ4 last year. Here’s what investors are expecting from Foot Locker on Friday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for FL to report 75c EPS and $1.775B revenue, while the current Estimize.com consensus from Buy Side and Independent contributing analysts is 75c EPS and $1.763B in revenue. This quarter, the buy-side as represented by the Estimize.com community is expecting Foot Locker to match the Wall Street consensus on EPS but come up slightly short on sales.
Over the previous 6 quarters, the consensus from Estimzie.com was more accurate than Wall Street in forecasting Foot Locker’s EPS and revenue 4 and 5 times, respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a very small differential between the two groups.
The distribution of estimates published by analysts on the Estimize.com platform range from 73c to 76c EPS and $1.720B to $1.778B in revenues. This quarter, we’re seeing a small distribution of estimates for Foot Locker on EPS, but a wider distribution of estimates on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings. In this case, we are seeing a narrower distribution of estimates on profit, which is indicative of higher implied certainty and less volatility after the earnings release.
Over the past 4 months, the Wall Street EPS consensus inched higher from 74c to 75c, while the Estimize consensus also increased from 74c to 75c at the end of the quarter. Meanwhile, the Wall Street revenue forecast rose from $1.761B to $1.775B, while the Estimize forecast increased at the end of the quarter from $1.754B to $1.763B. Timeliness is correlated with accuracy and upward analyst revisions at the end of the quarter are often a bullish indicator.
The analyst with the highest estimate confidence rating this quarter is robertim, who projects 76c EPS and $1.765B in revenue. In the Winter 2014 season, robertim is rated as the 302nd best analyst and is ranked 461st overall among over 3,950 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, robertim is making a bullish call expecting Foot Locker to beat the Estimize consensus on both EPS and revenue.
This quarter, contributing analysts on the Estimize.com platform are expecting the broader trend of weaker-than-expected sales to spillover to Foot Locker. If the athletic wear and sneaker retailer can beat the bar set by investors, which is lower than the purported Wall Street consensus, the stock price could be in for a boost.