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How Children's Place (PLCE) is Placed Ahead of Q4 Earnings

Zacks Equity Research

The Children's Place, Inc. PLCE is scheduled to report fourth-quarter fiscal 2019 numbers on Mar 19, before market open. The company has a trailing four-quarter positive earnings surprise of 34.8%, on average. If all goes well, the quarter will mark the fourth straight earnings beat for the company.

The Zacks Consensus Estimate for fourth-quarter earnings has increased a couple of cents in the past 30 days to $1.59 per share, indicating a rise of 44.6% from the year-ago quarter’s reported figure. For revenues, the consensus mark stands at $512.4 million, suggesting a decline of 3.4% from the year-ago quarter’s tally.

The Children's Place, Inc. Price and EPS Surprise

The Children's Place, Inc. Price and EPS Surprise

The Children's Place, Inc. price-eps-surprise | The Children's Place, Inc. Quote

Key Factors

We expect the company’s fiscal fourth-quarter top line to bear the brunt of soft comparable retail sales. At its last earnings call, management had projected a mid-single-digit decline in comparable retail sales. Management also stated that it witnessed weaker-than-expected mall traffic in the fiscal fourth quarter. Consequently, it had anticipated sales of $504-$509 million for the quarter. Also, the company has been witnessing lower store traffic, transactions and conversions.

Nevertheless, its bottom line is likely to have benefited from solid margins. During the last earnings call, management also guided adjusted operating income to be 6.1-6.8% of sales, up from 4.1% reported in the year-ago quarter. This is likely to have been driven by a strong gross margin and leveraged SG&A expenses, as a rate of sales. As a result, Children's Place envisions adjusted earnings of $1.48-$1.68 per share. Moreover, it expects total inventories to increase high-single digits at the end of the fiscal fourth quarter.

Additionally, Children's Place has integrated Radial, a third-party logistics provider, into its logistics network. This is likely to have assisted the company to meet e-commerce demand in the fiscal fourth quarter. Initiatives like alternate channels of distribution, digital transformation, fleet optimization and international expansion also bode well.

What the Zacks Model Says

Our proven model predicts an earnings beat for Children's Place this time around. The combination of a positive Earnings ESP Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Children's Place has a Zacks Rank #3 and an Earnings ESP of +1.16%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat.

Fastenal Company FAST has an Earnings ESP of +1.07% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Five Below, Inc. FIVE has an Earnings ESP of +0.32% and a Zacks Rank #3.

lululemon athletica inc. LULU has an Earnings ESP of +0.27% and a Zacks Rank #3.

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