Wal-Mart Stores Inc. WMT is set to report first quarter fiscal 2017 results, before the opening bell on May 19. Last quarter, this retail giant posted a positive earnings surprise of 2.05%. We note that the company has beaten earnings estimates in two of the last four quarters, missed estimates in one quarter and matched the same in the remaining quarter, making for an average positive surprise of 1.17%. Let’s see how things are shaping up prior to this announcement. Factors to Consider Wal-Mart has been delivering positive comps in the U.S of late as a result of lower fuel prices, which eased consumers’ spending power. E-commerce has also contributed to the company’s sales. The company expects the trend of positive comps at Wal-Mart U.S. to continue in the soon-to-be reported quarter. Wal-Mart expects U.S. comp sales growth of around 50 basis points for the 13-week period ending Apr 29 compared with 1.1% comps growth last year. While lower fuel prices will provide some tailwinds, food deflation, mainly in meat and dairy products will remain a challenge. Sam’s Club comp sales, without the impact of fuel sales, are expected to be flat compared with 0.4% growth last year. However, the Bentonville, AR-based company is facing severe challenges and showing signs of acute weakness. Wal-Mart expects to incur huge e-commerce expenses. In an effort to compete with the biggest online retailer Amazon.com AMZN and to improve customer service, Wal-Mart is aggressively investing in its e-commerce business. Wal-Mart's focus on e-commerce will in turn lower profit margin potential, given shipping costs and price competition involved in it. In addition, Wal-Mart is facing intense competition on all fronts, ranging from dollar stores to traditional grocery store chains and online business. Its international operations are also under pressure with a stronger dollar eating into sales. At the same time, Wal-Mart projects slower growth in small format Express stores due to price competition from local grocers in some markets. As a result, the company plans to close 269 stores in the U.S and globally, which will affect about 10,000 jobs domestically and will eliminate 6,000 jobs overseas, with a majority of the international impact relating to the closures in Brazil. These store closures will also impact fiscal 2017 net sales growth. Wal-Mart has also pledged to invest $2.7 billion for raising employees’ wages and give them extra training in fiscal 2017. Under the initiative, Wal-Mart had increased its minimum wage to $9 an hour in April, and to $10 per hour in Feb 2016. The initiative of paying higher wages will further raise the expense burden on the retailer. Higher labor costs along with the company’s efforts to overhaul its stores and invest in its online operations will weigh on its earnings. The company anticipates higher wage investments to hurt the first quarter more on a year-over-year basis than in subsequent quarters. In the first quarter of fiscal 2017, earnings are expected in a range of 80 cents to 95 cents per share, compared with the prior-year quarter’s earnings of $1.03 per share. Currency is expected to negatively impact earnings by 3 cents. Earnings Whispers Our proven model does not conclusively show that Wal-Mart is likely to beat earnings 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. That is not the case here as you will see below. Zacks ESP: Earnings ESP for Wal-Mart is 0.00% as both the Zacks Consensus Estimate and the Most Accurate estimate stand at 88 cents. Zacks Rank: Wal-Mart’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise. We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum. Stocks to Consider Here are some consumer staple companies, which are worth considering, as our model shows that they have the right combination of these two elements: Best Buy Co., Inc. BBY, with an Earnings ESP of +2.94% and a Zacks Rank #2. The Home Depot, Inc. HD, with an Earnings ESP of +1.50% and a Zacks Rank #3. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AMAZON.COM INC (AMZN): Free Stock Analysis Report HOME DEPOT (HD): Free Stock Analysis Report BEST BUY (BBY): Free Stock Analysis Report WAL-MART STORES (WMT): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research