Our quantitative earnings model predicts that Helen of Troy's (Nasdaq: HELE) Q1 EPS and revenue numbers will dramatically exceed analyst expectations. The company is expected to release earnings after the market close on Wednesday, July 8th.

We'll start by providing our projections, proceed to an explanation of the rationale behind the projections, and finish with some additional analysis and supplementary charts. Our track record of past quarterly earnings predictions made by the model can be found here.

EPS Projections

On average, Wall Street analysts expect Helen to report $1.06 in EPS for the quarter. Our model projects a 65-75% probability that Helen will beat these projections. It expects a large beat (5-10%) on consensus estimates, implying Q1 EPS will actually be between $1.11 to $1.16.

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Revenue Projections

On average, sell-side analysts on Wall Street expect Helen to report sales of $347 million for the quarter. Our model projects a 65-75% probability that Helen will beat these projections. It expects a small beat (0-5%) on consensus estimates, implying that Q1 revenue will actually be between $347m to $364m.

Source

Rationale

Analyst estimates are consistently too conservative as companies beat earnings estimates over 60% of the time. Analysts may do this to stimulate trading (e.g., Hayes 1998), to obtain access to management (e.g., Lim 2001) or to confirm a prior sentiment on a stock (e.g. Hwang 1996). Either way, analysts are incentivized to "play nice" with the companies they cover, and this manifests itself in earnings estimates that are consistently lower than they should be.

This pattern of earnings estimate manipulation can be taken to the extreme in certain companies. Thus, the most important factor to analyze when predicting whether a company will beat earnings estimates ahead of time is to look at its past track record of estimate beats. Helen's EPS beat history is shown below: