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Will Ralph Lauren (RL) Beat Estimates This Earnings Season?

Zacks Equity Research

Ralph Lauren Corporation (RL) is slated to release its first-quarter fiscal 2015 results on Aug 6, 2014. In the previous quarter, this premium lifestyle merchandise retailer reported a positive earnings surprise of 2.44%. Let’s see how things are shaping up for this announcement.

Factors Affecting This Quarter

Though the company’s fourth-quarter fiscal 2014 results were strong, it projects a slowdown in sales growth and a decline in margins in the first quarter as well as for fiscal 2015. The company highlighted that the weak forward outlook was mainly due to increased investments toward enhancement of its global retail operations and infrastructure as well as higher capital allotments to augment advertising and marketing.

For the first quarter the company expects net revenue to increase 3%–5%, much lower than the growth of 13.6% registered in the fourth quarter fiscal 2014. Operating margin is anticipated to contract in the range of 300–350 bps from the year-ago level.

Earnings Whispers?

Our proven model does not conclusively show that Ralph Lauren is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP: Ralph Lauren currently has an Earnings ESP of 0.00%. This is because the Most Accurate estimate stands at $1.75 a share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #2 (Buy): Ralph Lauren’s Zacks Rank #2 when combined with a Zero 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.

Other Stocks to Consider

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

The Andersons Inc. (ANDE) has an Earnings ESP of +6.09% and a Zacks Rank #1 (Strong Buy).

Ameren Corp. (AEE) has an Earnings ESP of +14.04% and a Zacks Rank #2.

Macy’s Inc. (M) has an Earnings ESP of +1.16% and a Zacks Rank #3 (Hold).

Read the Full Research Report on RL
Read the Full Research Report on AEE
Read the Full Research Report on M
Read the Full Research Report on ANDE


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