Lowe’s Companies Inc. (LOW – Free Report) is slated to report fourth-quarter fiscal 2016 results on Mar 1, before the market opens. The big question facing investors now is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 79 cents, reflecting year-over-year growth of over 33%. We noted that the Zacks Consensus Estimate has increased by a penny in the past seven days. Analysts polled by Zacks expect revenues of $15,280 million, up about 15.4% from the year-ago quarter.

Lowe’s forms part of the Retail-Wholesale sector. Per the latest Earnings Preview, total earnings for the sector are expected to decline marginally by 1.2%; however revenue is projected to improve 4.7%. We noted that the Retail-Wholesale sector has lagged the broader market in the past six months. In the said time frame, this Zacks categorized sector gained 2.6%, while the S&P 500 index advanced 7.5%.

Factors at Play

Lowe’s shares have gained 5% in the past three months, underperforming the Zacks categorized Building Product-Retail/Wholesale industry, which has gained 9%. This underperformance can be attributed to lower-than-expected top line and bottom line in the trailing two quarters.

We believe that an improving job scenario, gradual recovery in the housing market and merchandising initiatives bode well for Lowe’s over the long run. Additionally, the Canadian business has been performing quite well, with strong comps growth (in local currency) recorded in the last three years. For fiscal 2016, Lowe’s anticipates total sales growth of 9–10%. However, analysts pointed that the company’s expansion into regions where it already operates could cannibalize its sales performance and lower traffic count at existing stores.

What the Zacks Model Unveils?

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

Lowe’s has an Earnings ESP of -1.27% as the Most Accurate estimate stands at 78 cents, while the Zacks Consensus Estimate is pegged higher at 79 cents. Although, Lowe’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

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:

Burlington Stores, Inc. (BURL – Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. (BBY – Free Report) has an Earnings ESP of +1.81% and a Zacks Rank #3.

Costco Wholesale Corporation (COST – Free Report) has an Earnings ESP of +0.74% and a Zacks Rank #3.

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