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Factors Influencing Urban Outfitters' (URBN) Q4 Earnings

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Urban Outfitters Inc. (URBN - Free Report) is scheduled to release fourth-quarter fiscal 2018 results on Mar 6. In the preceding quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 24.2%.

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

Factors at Play

Robust performance at the company’s Urban Outfitters, Anthropologie Group and Free People during the holiday season is likely to drive results in the soon-to-be reported quarter. Moreover, the Zacks Consensus Estimate is pegged at 63 cents, reflecting a year-over-year increase of nearly 14.6%.

Recently, this Philadelphia, PA-based company posted fourth-quarter net sales of $1,089.1 million that improved 5.7% on a year-over-year basis. At Urban Outfitters, the metric was up 4.9% to $433.9 million while the same at Anthropologie Group improved 5.5% to $447.2 million. At Free People, net sales increased 8.2% to $201.7 million. In the quarter under review, Food and Beverage net sales came in at $6.3 million compared with $6 million in the prior-year quarter.

Meanwhile, comparable retail segment’s net sales, including the comparable direct-to-consumer channel, were up 4% year over year. Moreover, comparable retail segment net sales inched up 2% at Urban Outfitters, 5% at Anthropologie Group and 8% at the Free People brands. Also, the company registered double-digit growth in direct-to-consumer channel. At the Wholesale segment, net sales improved 6.3%. Comparable sales were driven by robust apparel sales performance.

We believe new store openings, increase in direct penetration, growing wholesale operations and merchandising improvements bode well for the long term. In addition, management is making all possible efforts to enhance the performance of brands, through store refurbishment and by bringing in more compelling assortments.

However, investors are concerned about management’s remark over gross margin that is expected to decline year over year in fourth-quarter fiscal 2018 on account of de-leverage in delivery as well as logistic expenditures. In third-quarter fiscal 2018, gross margin contracted 142 bps to 33.4%, following a decline of 440 bps and 284 bps to 34.1% and 31.5% in the second and first quarter, respectively.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise

What Does the Zacks Model Say?

Our proven model shows that Urban Outfitters 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.

Urban Outfitters’ ESP of +0.85% and a Zacks Rank #3 make us reasonably confident of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

Here are some other stocks worth considering from the same space with the right combination of elements to deliver an earnings beat:

American Eagle Outfitters, Inc. (AEO - Free Report) has an Earnings ESP of +0.53% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Kroger Co. (KR - Free Report) has an Earnings ESP of +0.4% and a Zacks Rank of 2.

Ross Stores, Inc. (ROST - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #2.

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