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Factors Influencing Wolverine's (WWW) Fate in Q1 Earnings

Zacks Equity Research

Wolverine World Wide, Inc. WWW is scheduled to report first-quarter 2019 numbers on May 9, before the opening bell. We note that the company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 18%. In the last reported quarter, the company delivered a positive earnings surprise of 6.1%. 

Let’s see what’s in store for the company this time around.

How are Estimates Faring?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 47 cents, indicating a decrease of 6% from 50 cents per share registered in the year-ago quarter. Notably, the consensus mark has remained stable over the past 30 days.

For revenues, the consensus mark stands at $534.2 million almost flat with the year-ago period’s reported figure. The Zacks Consensus Estimate for revenues of Outdoor & Lifestyle Group and is pegged at $227 million, implying an increase of 1.9% year over year while revenues of Boston Group is expected to remain flat at $219 million. However, the same for Heritage Group stands at $72 million, indicating a decline of 1.5% on a year-over-year basis. 

Wolverine World Wide, Inc. Price and EPS Surprise

Wolverine World Wide, Inc. Price and EPS Surprise | Wolverine World Wide, Inc. Quote

Factors Affecting Wolverine

Wolverine has been progressing well with its WAY FORWARD transformation initiative that aims at driving growth and profitability amid a competitive market scenario. The agenda encompasses three key strategies — Powerful Product Creation Engine, Digital-Direct Offense and International Expansion. Speaking of powerful product development, the company plans to develop brands that suit consumers’ needs more aptly on the back of advanced technologies and accurate market insights. Such well-chalked plans are likely to boost the company’s operating margin in the to-be-reported quarter.

Further, Wolverine’s e-commerce business is gaining traction. The company has been utilizing its digital capabilities to enhance speed of information and product flow. Additionally, the company focuses on boosting social presence, digital content and flow of information, and better management of consumer database. In order to support growth in the digital arena, the company is investing toward strengthening of distribution centres.

However, soft international demand, especially in Latin America, is a concern. Moreover, sluggishness in Saucony business along with weak demand of Wolverine leathers might weigh on the company’s top line in the first quarter. In fact, revenues in the first quarter are expected to be flat year over year.

The company anticipates adjusted earnings to be 45-48 cents in the first quarter, which is less than 50 cents reported in the prior-year quarter. This view includes elevated SG&A expenses related to higher compensation costs, increased marketing and digital investments, warehouse costs, and high debt. Also, unfavourable currency headwind of $5 million is expected to hurt the company’s bottom line in the first quarter of 2019.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Wolverine is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Wolverine has a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With a Favorable Combination

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.

Children’s Place, Inc. PLCE has an Earnings ESP of +9.96% and a Zacks Rank #2.

Nike, Inc. NKE has an Earnings ESP of +2.13% and a Zacks Rank #3.

Deckers Outdoor Corporation. DECK has an Earnings ESP of +53.19% and a Zacks Rank #3.

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