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Can Ralph Lauren (RL) Q2 Earnings Maintain Solid Streak?

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Ralph Lauren Corporation (RL - Free Report) is slated to report second-quarter fiscal 2017 results on Nov 10. Last quarter, the company delivered a positive earnings surprise of 19.1%. In fact, it has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 10.1%. Let’s see how things are shaping up for this announcement.

RALPH LAUREN CP Price and EPS Surprise


Factors Influencing This Quarter

While Ralph Lauren posted solid results in the last reported quarter, it provided soft sales and margins outlook for the second quarter and fiscal 2017. Apart from currency woes (though minimal), revenue growth for both periods is expected to be hurt by the intentional pullback in inventory receipts, store closures, price management, and other initiatives, alongside challenging retail traffic trends and a highly promotional retail backdrop.

Also, the company’s margins are expected to bear the brunt of a rise in new store expenses, negative currency impact, infrastructure investments and fixed expense deleverage, offset by synergies from cost-saving actions. While Ralph Lauren’s recently drawn restructuring plans are expected to help boost its performance in the long run, we believe these actions will continue to dent results throughout fiscal 2017.

Nonetheless, the company’s growth story looks compelling as it possesses a strong portfolio of globally recognized brands and a healthy financial status. This, along with constant initiatives focused on profitable areas, should boost growth. Given the mixed factors, we prefer to wait and see if Ralph Lauren can continue with its robust streak in the second quarter of fiscal 2017.

Earnings Whispers

Our proven model does not conclusively show that Ralph Lauren is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Ralph Lauren currently has an Earnings ESP of +1.77%. This is because the Most Accurate estimate of $1.73 stands above the Zacks Consensus Estimate of $1.70. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Ralph Lauren carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Michael Kors Holdings Limited (KORS - Free Report) , scheduled to release earnings on Nov 10, has an Earnings ESP of +4.55% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cott Corporation (COT - Free Report) , scheduled to release earnings on Nov 10, has an Earnings ESP of +16.67% and a Zacks Rank #3 (Hold).

Hibbett Sports Inc. (HIBB - Free Report) , expected to report earnings on Nov 18, currently has an Earnings ESP of +4.00% and a Zacks Rank #2.

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