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Why Is Kohl's (KSS) Down 7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Kohl's (KSS - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kohl's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Kohl's Q3 Earnings Beat Estimates, Sales & Comps Up Y/Y

Kohl's delivered third-quarter fiscal 2018 results, with the top and the bottom line improving year over year and beating the Zacks Consensus Estimate. While this marked the sixth straight quarter of revenue beat, earnings surpassed the consensus mark for the fourth time in a row. Better-than-expected results prompted management to raise fiscal 2018 earnings view.

Quarterly earnings of 98 cents per share beat the Zacks Consensus Estimate of 96 cents and soared 40% on a year-over-year basis. The uptick came on the back of higher sales, improved comparable sales (comps) and enhanced gross margin.

Sales and Margins

Total revenues came in at $4,628 million, up 1.3% from the prior-year quarter’s tally and ahead of the Zacks Consensus Estimate of $4,619 million. Net sales also improved 1.3% to $4,369 million, while other revenues increased to $259 million from $255 million in the year-ago quarter.

Further, comps rose 2.5% from a rise of 0.1% recorded in the year-ago quarter. Well, comps have been positive since the past five quarters.

Moving on, gross margin expanded 25 basis points (bps) to 37% in the reported quarter. Further, operating income came in at $258 million, up roughly 0.4% from the prior-year quarter’s level.

Other Financial Details

Kohl’s ended the quarter with cash and cash equivalents of $1,047 million, long-term debt of $2,272 million and shareholders’ equity of $5,453 million. The company generated net cash flow of $1,423 million from operating activities during the first nine months of fiscal 2018. Further, on Nov 14, the company’s board approved a quarterly dividend of 61 cents per share, payable on Dec 26 to shareholders in record as on Dec 12.

Guidance

Well, such upbeat results boosted the company’s bottom-line expectations for fiscal 2018. Management now expects adjusted earnings per share in the range of $5.35-$5.55 compared with the previous view of $5.15-$5.55. Including loss on extinguishment of debt, earnings are projected in the range of $5.16-$5.36 compared with the previous projection of $4.96-$5.36.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Kohl's has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kohl's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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