Will Ralph Lauren (RL) Miss Earnings Estimates?


Ralph Lauren Corporation (RL) is slated to release its third-quarter fiscal 2014 results on Feb 5, 2014. In the previous quarter, this premium lifestyle merchandise retailer reported a positive earnings surprise of 1.36%. Let’s see how things are shaping up for this announcement.

Performance this Past Quarter

Last quarter, Ralph Lauren came up with better-than-expected bottom-line results, while it also provided upbeat revenue guidance and raised its quarterly cash dividend. Though earnings for the second quarter declined on a year-over-year basis, the company’s revenue rose on the back of improved performance across the company’s wholesale and retail segments. Bolstered by improved sales results, Ralph Lauren raised its lower-end revenue guidance for fiscal 2014, projecting sales growth of 5%–7%, up from 4%–7% guided earlier. Moreover, due to improved global retail operations, Ralph Lauren now anticipates operating margin contraction on the lower end of its previously announced guidance of a contraction of 25–75 bps.

Earnings Whispers?

Our proven model does not conclusively show that Ralph Lauren 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, #2 or #3 for this to happen. This is not the case here, as you will see below.

Positive Zacks ESP: ESP for Ralph Lauren is +0.40%. This is because the Most Accurate estimate stands at $2.52, while the Zacks Consensus Estimate is pegged at $2.51.

Zacks Rank #4 (Sell): Ralph Lauren’s Zacks Rank #4 when combined with a positive ESP makes surprise prediction difficult. We caution against stocks with a Zacks Rank #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 these have the right combination of elements:

Foot Locker Inc. (FL) has an Earnings ESP of +1.33% and a Zacks Rank #2 (Buy).

Columbia Sportswear Company (COLM) has an Earnings ESP of +5.62% and a Zacks Rank #2 (Buy).

Finish Line Inc. (FINL) has an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).

Read the Full Research Report on COLM
Read the Full Research Report on RL
Read the Full Research Report on FL
Read the Full Research Report on FINL

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