Will Coach (COH) Pull a Surprise Again in Q3 Earnings?

Coach, Inc. COH, which is expected to release third-quarter fiscal 2017 results on Apr 25, has seen shares jump 7.8% in the past three months. The stock has comfortably outperformed the Zacks categorized Textile-Apparel Manufacturing industry that declined 8.8% and the broader Consumer Discretionary sector that gained 4.7%. This gives us a fair idea that the stock is favorably placed among the list of companies that defines the industry.

Per the latest Earnings Preview report as of Apr 21, Consumer Discretionary sector is likely to witness earnings growth of 3.6% and revenue increase of 11.3% this reporting cycle. Let’s take a closer look as to how Coach is expected to contribute to the sector’s performance.

What to Expect from Coach?

The question lingering in investors’ minds is whether this designer and marketer of fine accessories and gifts as well as house of lifestyle brands will be able to continue with its positive earnings surprise streak in the quarter to be reported. The company’s past performance reveals that it had surpassed the Zacks Consensus Estimate in the past 12 consecutive quarters. In the trailing four quarters, it had outperformed the Zacks Consensus Estimate by an average of 6.2%.

The current Zacks Consensus Estimate for the quarter under review is 44 cents, which is in line with the year-ago period. We note that the Zacks Consensus Estimate has remained stable in the past 60 days. Analysts polled by Zacks expect revenues of $1,018 million, down over 1% from the year-ago quarter.

Factors at Play

Coach is undergoing a brand transformation and introducing modern luxury concept stores in key markets. The acquisition of Stuart Weitzman has been accretive to performance and is being viewed as a significant step in efforts toward becoming a multi-brand company. Moreover, management has undertaken transformation initiatives revolving around product, stores and marketing, which are likely to have a favorable impact in the quarter to be reported.

Management had earlier projected that the third quarter nominal revenue is likely to be impacted by adverse currency fluctuations as well as calendar shift in North America, with Easter falling in the fourth quarter this fiscal year compared with the third quarter in the last fiscal. Further, the lowering of promotional events and door closures with respect to North American wholesale channel and an expected shift in Coach international wholesale shipment timing into the fourth quarter from the third quarter will also affect results.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Coach is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Coach has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 44 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.

Coach, Inc. Price, Consensus and EPS Surprise

 

Coach, Inc. Price, Consensus and EPS Surprise | Coach, Inc. Quote

Stocks Poised to Beat Earnings Estimates

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:

Lowe's Companies, Inc. LOW has an Earnings ESP of +2.86% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amazon.com, Inc. AMZN has an Earnings ESP of +10.68% and a Zacks Rank #3.

Tiffany & Co. TIF has an Earnings ESP of +1.43% and a Zacks Rank #3.

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