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Chewy (CHWY) to Post Q2 Earnings: What Awaits the Stock?

Chewy's (CHWY) second-quarter performance is likely to have gained from growth in active customer base. Also, strong pet health and service offerings...

This story originally appeared on Zacks

Chewy, Inc. CHWY is likely to register top-line growth when it reports second-quarter fiscal 2021 results on Sep 1, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $2,168 million, which indicates a surge of 27.5% from the prior-year quarter’s reported figure.

The company is likely to report a loss for the quarter in review. The Zacks Consensus Estimate is currently pegged at a loss of 1 cent per share. The consensus mark has narrowed down by a penny in the past seven days. In the prior-year quarter, the company reported a loss of 8 cents per share. In the last reported quarter, the company’s bottom line outperformed the Zacks Consensus Estimate by a significant margin. This renowned supplier of pet food and other related products has a trailing four-quarter earnings surprise of 291.4%, on average.

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Key aspects to Note

Chewy’s second-quarter performance is likely to have gained from continued growth in its active client base. Boosting customer base and enhancing their wallet share are key components of the compnay’s growth strategy. Strength in the e-commerce channel is likely to have been an upside. To attract online sales, the company has been undertaking technology upgrades for its website and other online platforms.

Chewy is likely to have gained from efforts to drive structural growth across hard goods, proprietary brands, specialty and healthcare verticals during the second quarter. It has been expanding product assortments across pet food, accessories as well as services. In particular, the company’s robust strides to expand pet health and wellness products as well as services are encouraging.  Its Compounding Pharmacy business, telehealth offerings and Connect with a Vet services have been doing well. Also, the company’s efforts to boost capacity and distribution network are yielding.

In its last earnings call, management highlighted that second-quarter sales are expected in the bracket of $2.15-$2.17 billion, calling for 26-28% year-on-year growth.

However, supply chain hurdles such as inventory and labor shortages, stemming from operating amid the pandemic, are likely to have been a drag during the quarter in review. Also, rising selling, general and administrative expense are a concern for the company.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Chewy this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Chewy has a Zacks Rank #1 and an Earnings ESP of +100.00%.

Other Stocks With Favorable Combination

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

J & J Snack Foods Corp. JJSF currently has an Earnings ESP of +0.44% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Simply Good Foods Company SMPL currently has an Earnings ESP of +1.50% and a Zacks Rank #2.

General Mills, Inc. GIS currently has an Earnings ESP of +1.32% and a Zacks Rank #3.

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