Back to top

Analyst Blog

Zacks Equity Research

Michael Kors (KORS) Q2 Earnings: A Beat in the Cards?

JWN DKS JCP KORS

Trades from $3

Michael Kors Holdings Limited (KORS - Free Report) is scheduled to report second-quarter fiscal 2017 results on Nov 10. In the last quarter, the company recorded a positive earnings surprise of 18.9%. Notably, the company surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 10.9%. Let’s see how things are shaping up prior to this announcement.

Likely Earnings Beat in the Cards

Our proven model shows that Michael Kors is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The Most Accurate estimate stands at 89 cents, while the Zacks Consensus Estimate is pegged lower at 88 cents. So the ensuing difference – the Earnings ESP – is of +1.14%. A positive ESP combined with the company’s Zacks Rank #3, makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Factors Influencing this Quarter

Michael Kors has been constantly deploying resources to expand its product offerings, open new stores, build shop-in-shops along with upgrading its information system and distribution infrastructure. Management intends to upgrade its eCommerce platform and expects the channel to be a significant contributor in the long run. We note that despite the possibility of heavy investments weighing upon margins in the short term, management continues to take up strategic endeavors. These are important in the light of competitive retail landscape, sluggish mall traffic and short-term challenges such as foreign currency headwinds.

Management anticipates second-quarter fiscal 2017 revenues in the range of $1.07–$1.085 billion. Comps are projected to fall in mid-single digits. Earnings are projected in the range of 84–88 cents per share for the quarter.

The company expects gross margin to improve in the second quarter by approximately 100 to 130 basis points (bps) on account of favorable geographic and channel mix shift. However, management highlighted that operating expense is likely to increase mainly due to sustained investments in international expansion, digital flagships and global infrastructure. Operating expense as a percentage of total revenue is anticipated to increase 790 to 820 bps. The company expects operating margin to be approximately 17%.

MICHAEL KORS Price, Consensus and EPS Surprise

MICHAEL KORS Price, Consensus and EPS Surprise | MICHAEL KORS Quote

Stocks That Warrant a Look

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

Dick's Sporting Goods Inc. (DKS - Free Report) currently has an Earnings ESP of +2.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

J. C. Penney Company, Inc. (JCP - Free Report) currently has an Earnings ESP of +10% and a Zacks Rank #3.

Nordstrom Inc. (JWN - Free Report) currently has an Earnings ESP of +1.89% and a Zacks Rank #3.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>


In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

NORDSTROM INC (JWN) - free report >>

DICKS SPRTG GDS (DKS) - free report >>

PENNEY (JC) INC (JCP) - free report >>

MICHAEL KORS (KORS) - free report >>