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The Zacks Consensus Estimate for the fiscal third-quarter bottom line is pegged at 20 cents per share, suggesting a 71.8% decline from the prior-year quarter’s actual. The consensus estimate for fiscal third-quarter earnings has moved up by a penny in the past seven days. For revenues, the consensus mark is pegged at $3.6 billion, indicating a 10.5% decrease from that reported in the year-ago quarter.
In the last reported quarter, Gap’s earnings beat the Zacks Consensus Estimate by 277.8%. The company delivered a significant earnings surprise of 1,001.6%, on average, in the trailing four quarters.
Gap’s third-quarter fiscal 2023 performance is expected to have gained from improved margins, driven by lower airfreight and improved promotional activity. Lower advertising expenses and technology investments from cost-saving actions also bode well.
On the last reported quarter’s earnings call, management predicted the third-quarter fiscal 2023 gross margin to be in line with the 38.7% reported last year, which aligns with our expectation. The metric is likely to have gained from inflationary leverage stemming from improved commodity costs and ocean freight rates.
Gap has been aggressively undertaking cost-management actions, which are expected to have improved its performance in the to-be-reported quarter. Some notable efforts were increasing spans of control, and decreasing management layers to improve the quality and speed of decision-making, as well as creating a consistent organizational structure across all four brands.
The company has been on track with the execution of its Power Plan 2023, which focuses on opening highly profitable Old Navy and Athleta stores, while closing the underperforming Gap and Banana Republic stores.
However, the uncertain macro and consumer environments are expected to have taken a toll on Gap’s top-line performance in the to-be-reported quarter. Rising prices of essential commodities are likely to have hurt lower-income consumers' spending on non-essentials like apparel.
In its last earnings report, management expected third-quarter fiscal 2023 sales to decrease in the low-double digits, in sync with our estimate of a 10.5% decline. This view included $60 million in sales for Gap China.
Zacks Model
Our proven model conclusively predicts an earnings beat for Gap this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Gap has a Zacks Rank #2 and an Earnings ESP of +18.31%.
Other Stocks With the Favorable Combination
Here are some other companies you may want to consider, as our model shows that they also have the right combination of elements to post an earnings beat:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.60% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for TJX’s quarterly revenues is pegged at $13.1 billion, which suggests growth of 7.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for TJX’s earnings has been unchanged at 97 cents per share in the past 30 days. The consensus estimate indicates 12.8% growth from the year-ago quarter’s reported figure.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +2.40% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 numbers. The consensus mark for ROST’s quarterly earnings has been unchanged at $1.21 per share in the past 30 days. The consensus estimate suggests 21% growth from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for Ross Stores’ quarterly revenues is pegged at $4.83 billion, which suggests growth of 5.8% from the figure reported in the prior-year quarter.
Walmart (WMT - Free Report) currently has an Earnings ESP of +0.21% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for WMT’s quarterly revenues is pegged at $159.1 billion, which suggests 4.1% growth from the figure reported in the prior-year quarter.
The consensus mark for WMT’s quarterly earnings has moved up by a penny in the past seven days to $1.51 per share. The consensus estimate suggests growth of 0.7% from the year-ago quarter.
Image: Bigstock
Factors Likely to Support Gap's (GPS) Earnings Beat in Q3
The Gap, Inc. (GPS - Free Report) is expected to witness earnings growth when it reports third-quarter fiscal 2023 numbers on Nov 16.
The Zacks Consensus Estimate for the fiscal third-quarter bottom line is pegged at 20 cents per share, suggesting a 71.8% decline from the prior-year quarter’s actual. The consensus estimate for fiscal third-quarter earnings has moved up by a penny in the past seven days. For revenues, the consensus mark is pegged at $3.6 billion, indicating a 10.5% decrease from that reported in the year-ago quarter.
In the last reported quarter, Gap’s earnings beat the Zacks Consensus Estimate by 277.8%. The company delivered a significant earnings surprise of 1,001.6%, on average, in the trailing four quarters.
The Gap, Inc. Price and EPS Surprise
The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote
Key Factors to Note
Gap’s third-quarter fiscal 2023 performance is expected to have gained from improved margins, driven by lower airfreight and improved promotional activity. Lower advertising expenses and technology investments from cost-saving actions also bode well.
On the last reported quarter’s earnings call, management predicted the third-quarter fiscal 2023 gross margin to be in line with the 38.7% reported last year, which aligns with our expectation. The metric is likely to have gained from inflationary leverage stemming from improved commodity costs and ocean freight rates.
Gap has been aggressively undertaking cost-management actions, which are expected to have improved its performance in the to-be-reported quarter. Some notable efforts were increasing spans of control, and decreasing management layers to improve the quality and speed of decision-making, as well as creating a consistent organizational structure across all four brands.
The company has been on track with the execution of its Power Plan 2023, which focuses on opening highly profitable Old Navy and Athleta stores, while closing the underperforming Gap and Banana Republic stores.
However, the uncertain macro and consumer environments are expected to have taken a toll on Gap’s top-line performance in the to-be-reported quarter. Rising prices of essential commodities are likely to have hurt lower-income consumers' spending on non-essentials like apparel.
In its last earnings report, management expected third-quarter fiscal 2023 sales to decrease in the low-double digits, in sync with our estimate of a 10.5% decline. This view included $60 million in sales for Gap China.
Zacks Model
Our proven model conclusively predicts an earnings beat for Gap this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Gap has a Zacks Rank #2 and an Earnings ESP of +18.31%.
Other Stocks With the Favorable Combination
Here are some other companies you may want to consider, as our model shows that they also have the right combination of elements to post an earnings beat:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.60% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for TJX’s quarterly revenues is pegged at $13.1 billion, which suggests growth of 7.3% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TJX’s earnings has been unchanged at 97 cents per share in the past 30 days. The consensus estimate indicates 12.8% growth from the year-ago quarter’s reported figure.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +2.40% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 numbers. The consensus mark for ROST’s quarterly earnings has been unchanged at $1.21 per share in the past 30 days. The consensus estimate suggests 21% growth from the
year-ago quarter’s reported number.
The Zacks Consensus Estimate for Ross Stores’ quarterly revenues is pegged at $4.83 billion, which suggests growth of 5.8% from the figure reported in the prior-year quarter.
Walmart (WMT - Free Report) currently has an Earnings ESP of +0.21% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2023 results. The consensus mark for WMT’s quarterly revenues is pegged at $159.1 billion, which suggests 4.1% growth from the figure reported in the prior-year quarter.
The consensus mark for WMT’s quarterly earnings has moved up by a penny in the past seven days to $1.51 per share. The consensus estimate suggests growth of 0.7% from the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.