We expect Kate Spade & Co. KATE to beat expectations when it reports second-quarter 2015 results, before the market opens, on Aug 5.
Why a Likely Positive Surprise?
Our proven model shows that Kate Spade is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Kate Spade currently has an Earnings ESP of +27.27%. This is because the Most Accurate estimate of 14 cents per share stands above the Zacks Consensus Estimate of 11 cents.
Zacks Rank: Kate Spade carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Kate Spade’s Zacks Rank #3 and Earnings ESP of +27.27% make us confident of an earnings beat.
What is driving the Better-than-Expected Results?
Kate Spade’s earnings surprise history depicts a positive average beat of 134.7% as the company has posted positive surprises in two of the trailing four quarters.
The company remains focused on enhancing its scale and expects to start reaping benefits from all the strategies adopted in 2014. Also, Kate Spade intends to remain committed toward expansion across both products and regions, while concentrating on improving margins to drive profitability. Moving ahead, the company expects to drive growth on the back of its solid brand portfolio, diverse business model and commitment toward enhancing operating margins. These aforementioned factors make us optimistic about the upcoming results.
Other Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
DSW Inc. DSW has an Earnings ESP of +2.38% and a Zacks Rank #2 (Buy).
Coach Inc. COH has an Earnings ESP of +3.45% and a Zacks Rank #3.
Gap Inc. GPS has an Earnings ESP of +1.52% and a Zacks Rank #3.
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