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Check Out Adidas' (ADDYY) Probability to Beat Earnings in Q2

Zacks Equity Research

Adidas AG ADDYY is slated to release second-quarter 2019 results on Aug 8.

The company has an impressive earnings surprise trend, having surpassed the Zacks Consensus Estimate in the last nine quarters. Moreover, it has an average trailing four-quarter beat of 11.2%.

Let’s see how things are shaping up prior to this announcement.

Which Way Are Q2 Estimates Headed?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.27, suggesting 4.1% growth from the prior-year quarter reported figure. Notably, the consensus mark remained unchanged over the past 30 days.

Adidas AG Price and EPS Surprise

Adidas AG Price and EPS Surprise

Adidas AG price-eps-surprise | Adidas AG Quote

For quarterly revenues, the consensus estimate stands at $6,205 million, indicating about a 1% decline from the year-ago quarter’s reported number.

Factors at Play

Strength in the Adidas brand, particularly in North America, has been driving the company’s quarterly performances. This is likely to continue in the to-be-reported quarter. Revenues at this brand improved 5% in first-quarter 2019 owing to robust performance at Sport Inspired and Sport Performance.

In addition, the company is gaining from its direct-to-consumer business including solid growth in the e-commerce channel. E-commerce sales surged 40% in the last reported quarter. Adidas is also experiencing strength in its strategic growth areas including North America and Greater China. These factors along with Adidas’ constant product launches and strong marketing initiatives are expected to boost the company’s top and bottom lines in the second quarter.

However, higher cost of investments might weigh on Adidas’ top- and bottom-line performance in the to-be-reported quarter. Apparently, management expects to invest significantly in the Reebok brand to revitalize and make it a more consumer-focused one.

Meanwhile, Adidas is witnessing softness across its Europe division owing to sales decline at both Adidas and Reebok brands. By the end of second-half 2019, the company expects this division to return to growth. While this looks positive, softness in the Europe division may persist and hurt results in the second quarter.

What the Zacks Model Unveils

Our proven model shows that Adidas is likely to beat earnings estimates in second-quarter 2019. 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.

Adidas has an Earnings ESP of +1.42% and a Zacks Rank #1.

Other Stocks With Favorable Combination

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

Callaway Golf Company ELY has an Earnings ESP of +2.97% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

lululemon athletica inc. LULU has an Earnings ESP of +0.97% and a Zacks Rank #2.

PVH Corp PVH has an Earnings ESP of +0.33% and a Zacks Rank #2.

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