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Wolverine (WWW) to Post Q2 Earnings: What's in the Offing?

Zacks Equity Research

Wolverine World Wide, Inc. WWW is scheduled to report second-quarter 2019 numbers on Aug 7, before the opening bell. We note that the company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 10.3%. In the last reported quarter, it delivered a positive earnings surprise of 4.3%. Let’s see how the company is positioned ahead of the upcoming quarterly results.

Earnings and Revenue Estimates

The Zacks Consensus Estimate for the second quarter is pegged at 50 cents, indicating a decline of 7.4% from the year-ago period. The consensus mark has remained stable over the past 30 days.

The consensus mark for revenues is pegged at $575.6 million, suggesting a growth of 1.5% from the year-ago quarter’s figure.

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise

Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote

Factors to Consider

Wolverine’s e-commerce business is gaining traction. The company has been utilizing its digital capabilities to boost social presence and enhance speed of information, and better manage consumer database and product flow. In order to support growth in the digital arena, it is investing toward strengthening of distribution centers. Notably, the company’s e-commerce business remained sturdy in the first quarter owing to such dedicated growth strategies. Management expects this channel to significantly contribute to its performance in the impending quarter.

Further, the company 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 revenues in the to-be-reported quarter.

However, the company is exposed to currency woes, which is likely to persist in the second quarter. Management expects low-single digit revenue growth including adverse impacts of currency in the to-be-reported quarter. Furthermore, the company expects to incur roughly $5 million of incremental start-up costs in the same quarter, with respect to the acquired Saucony operations in Italy, store openings and joining of a new member in the executive team. These expenses might hurt Wolverine’s operating margin and profitability.

What Our Model Says

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

Wolverine’s Earnings ESP of -1.67% combined with its Zacks Rank #4 (Sell) makes us apprehensive about an earnings beat. Markedly, we caution against sell-rated stocks (Zacks Rank #4 or 5) going into earnings announcement.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With 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 earnings beat.

Boot Barn Holdings, Inc. BOOT has an Earnings ESP of +7.33% and a Zacks Rank #1.

L Brands, Inc. LB has an Earnings ESP of +0.89% and a Zacks Rank #2.

Rent-A-Center, Inc. RCII has an Earnings ESP of +3.88% and a Zacks Rank #2.
            
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