Kate Spade & Company (KATE) is scheduled to report its third-quarter fiscal 2014 results on Nov 6. Last quarter, the company posted a positive earnings surprise of 600.0%. Let's see how things are shaping up for this announcement.
Factors Affecting the Upcoming Quarter
Though Kate Spade posted better-than-expected financial results, it sounded cautious about reaching its long-term targets within the established time frame. Moreover, the company lowered its long-term store opening guidance to 100 from 125.
Comparable-store sales (comps) growth for the remaining half of 2014 is expected to be in the high-single digit range as compared with growth of over 30% registered in the first half. This is due to relocation of those stores which are expected to decelerate the company’s comps and productivity growth until 2015. Thus, we are not very optimistic about the third-quarter results.
Earnings Whispers?
Our proven model does not conclusively project Kate Spade as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
Zacks ESP: ESP for Kate Spade is 0.00% since the Most Accurate estimate stands at 1 cent per share, which is in line with the Zacks Consensus Estimate.
Zacks Rank #2 (Buy): Kate Spade’s Zacks Rank #2 when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
L Brands Inc. (LB) has an Earnings ESP of +6.25% and a Zacks Rank #2.
The Kroger Co. (KR) with an Earnings ESP of +3.28% has a Zacks Rank #2.
Dean Foods Company (DF) has an Earnings ESP of +15.39% and a Zacks Rank #3 (Hold).
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