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What's in Store for Coach in 2Q13?

by Zacks Equity Research

January 22, 2013 | Comments : 0 Recommended this article: (0)

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Coach, Inc. ( COH - Analyst Report ) , an S&P 500 company, is set to report its second-quarter fiscal 2013 results on Jan 23. In the last quarter it posted a positive surprise of 2.7%. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Being a leading American marketer of fine accessories and gifts, Coach boasts a proven strategy of investing in stores to enhance store sales productivity through product innovation, compelling pricing strategy, new merchandise assortments, and a cost-effective global sourcing model. These factors have helped it remain afloat in a difficult consumer environment as well as drive top and bottom lines growth, as was evident from its last reported quarter. The company remains optimistic about its unisex Legacy lifestyle collection, dedicated men's stores and international growth opportunities to counter the soft consumer scenario. The company’s growth drivers also include the expansion of its global distribution model and its entry into under-penetrated markets.

Earnings Whispers?

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

Negative Zacks ESP: The Most Accurate estimate stands at $1.28 while the Zacks Consensus Estimate is pegged at $1.29. This comes to a difference of -0.78%.

Zacks Rank #3 (Hold): Coach’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

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:

Michael Kors Holdings Limited ( KORS - Snapshot Report ) , Earnings ESP of +5.00% and Zacks Rank #1 (Strong Buy)

PVH Corp. ( PVH - Snapshot Report ) , Earnings ESP of +0.67% and Zacks Rank #2 (Buy)

Ralph Lauren Corporation ( RL - Analyst Report ) , Earnings ESP of +1.80% and Zacks Rank #3 (Hold)

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