Shares of Pier 1 Imports Inc (NYSE:PIR) plunged after PIR stock shocked Wall Street with its fiscal year 2015 guidance. While Pier 1 initially was predicting earnings between 95 cents and $1.05 per share, yesterday PIR slashed its outlook to earnings between 80 cents and 83 cents per share.
By comparison, the analyst community has been calling for $1 EPS this year. According to management, Pier 1 is facing increasing supply chain expenses and a sales shortfall.
Clearly, this does not bode well for PIR stock’s next earnings announcement on April 8. Shareholders clearly agree. So, Pier 1 stock plunged over 20% yesterday.
No one likes to see one of their stocks lose over a fifth of its value. But the good news is that there is something you can do to protect yourself from unexpected volatility. Simply, before any of your stocks reports earnings, run it through Portfolio Grader.
There are two critical characteristics at the center of my stock analysis. The first is strong fundamentals. By fundamentals, I mean sales growth, earnings growth and the like. Growing companies are companies that are healthy and thriving. They have smart leaders who know how to run and manage a smart business. If a company is struggling to sell its products or is spending more than it makes, it’s not a company that you want to own for growth.
The second characteristic I look for in any great stock is strong buying pressure. Think of this as “following the money.” The more money that floods into a stock, the more momentum a stock has to rise. And there’s no doubt about it, we all like stocks that rise!
So, when you plug PIR into Portfolio Grader, you’ll notice that not only does Pier 1 stock fail with a D-rating…it has been stuck there for the past 12 months running! A D-rating makes PIR an automatic “sell.” That’s due to a combination of anemic buying pressure (D Quantitative Grade) and lackluster fundamentals (C Fundamental Grade).
In fact, of the eight fundamental metrics I graded PIR on, it only earned decent grades on two: Analyst earnings revisions and return on equity. However, after this latest announcement, it’s likely that even those grades will degrade in the coming weeks.
The bottom line is that running Pier 1 stock through Portfolio Grader a few days ago could have saved shareholders a lot of heartburn.
Louis Navellier is the editor of Blue Chip Growth.
