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Michael Kors Can't be Ignored

Zacks Equity Research

Michael Kors Holdings Limited (KORS) is looking promising now and the underlying factors are capable of carrying the momentum further. The stock holds a Zacks Rank #1 (Strong Buy) and has surged roughly 13% year-to-date, demonstrating its inherent strength and long-term earnings growth projection of 26.3%. We believe the stock could prove to be a solid bet for investors.

Michael Kors’ primary strength is its earnings surprise history. The company had outperformed the Zacks Consensus Estimate in the past 9 quarters. Looking at its earnings surprise history of the last four quarters, this global luxury lifestyle brand has topped the Estimate by an average of 23.3%, including an earnings surprise of a whopping 29.1% in third-quarter fiscal 2014.

Shares of Michael Kors have shot up approximately 21%, since posting solid third-quarter results. The quarterly earnings came in at $1.11 per share, surpassing the Zacks Consensus Estimate of 86 cents and surging 73.4% year over year. Revenue for the first time surpassed the $1 billion mark at $1.01 billion, handily beating the Zacks Consensus Estimate of $860 million and escalating nearly 59% year over year.

A good performance prompted management to provide an upbeat guidance. Management expects fourth-quarter revenue to be $790 million to $800 million and earnings between 63–65 cents a share. For the full year, revenue is likely to be in the range of $3.18 billion to $3.19 billion and earnings are forecasted in the band of $3.07 to $3.09 per share.

Ever since Michael Kors posted better-than-expected results and provided a solid guidance, the Zacks Consensus Estimate has been trending upwards. The Zacks Consensus Estimate for fiscal 2014 and 2015 increased 10.2% and 9.8% to $3.12 and $3.82, respectively, in the last 60 days.

Michael Kors is seeking to carve a niche in the high-end retail sector by broadening its footprint in strategic markets and offering merchandise that caters to the elite. In addition to its watch and handbag collection, Michael Kors is now focusing on enhancing apparel, footwear and other miscellaneous categories to compete better with peers like Coach Inc. (COH), Hanesbrands Inc. (HBI) and Ralph Lauren Corporation (RL).

Moreover, the company plans to invest additional capital in its fourth quarter, which is expected to be diverted toward the opening of new retail stores as well as its ongoing shop-in-shop conversions and investments to develop infrastructure and systems.

Read the Full Research Report on COH
Read the Full Research Report on RL
Read the Full Research Report on HBI
Read the Full Research Report on KORS

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