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Sally Beauty (SBH) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

Sally Beauty Holdings, Inc. SBH is scheduled to report second-quarter fiscal 2019 numbers on May 1, before the opening bell. Notably, in the trailing four quarters, the company has outperformed the Zacks Consensus Estimate, recording average positive earnings surprise of 3.1%. In the last-reported quarter, the company delivered a positive earnings surprise of 9.6%. Let’s see what awaits this quarterly release.

How Are Estimates Faring?

The Zacks Consensus Estimate for second-quarter earnings is pegged at 54 cents, in line with the year-ago quarter’s figure. The consensus mark remained stable over the past 30 days. For revenues, the consensus mark stands at $965.2 million, down 1.3% from $975.3 million, reported in the year-ago period.

Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise

Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise | Sally Beauty Holdings, Inc. Quote

Factors to Consider

Sally Beauty is well poised to gain from the rising demand for beauty products. To make the most of it, the company is committed toward constant innovation, product launches, buyouts and strengthening of digital operations. Also, it is on track with its transformation plan, especially the Sally Beauty Loyalty Program, which should positively influence the upcoming results.

The company continues to innovate and expand products as part of its transformation plan.  It anticipates to make products from Swedish vegan hair care brand Maria Nila available for its customers within the fiscal second quarter, which should contribute to the top line.

Apart from these, the company is undertaking supply chain efforts to optimize inventory levels and reduce costs. As part of such initiatives, it successfully implemented the first phase of a multi-year JDA supply-chain platform in first-quarter fiscal 2019.

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Further, it has started conducting tests of the new Oracle based point-of-sale systems. It is also upgrading its websites along with e-commerce and mobile capabilities. These initiatives are likely to boost performance in the impending results. However, the company is grappling with softness across its Sally Beauty Supply and Beauty Systems Group segments, which remains a worry.

Rising SG&A costs as well as soft margins remain concerns, though same-store sales growth and the aforementioned cost-saving efforts are likely to cushion the stock.

What Does the Zacks Model Say?

Our proven model does show that Sally Beauty is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sally Beauty has a Zacks Rank #2 and Earnings ESP of +1.23%, which makes us confident of a beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks with Favorable Combination

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Dollar General Corp. DG has an Earnings ESP of +1.51% and a Zacks Rank #3.

Ulta Beauty, Inc. ULTA has an Earnings ESP of +0.48 and a Zacks Rank #3.

Five Below, Inc. FIVE has an Earnings ESP of +0.96% and a Zacks Rank #3.

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