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Adidas (ADDYY) Q2 Earnings: Can it Pull a Surprise Again?

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Adidas AG (ADDYY - Free Report) is slated to release second-quarter 2017 results on Aug 3. The question lingering in investors’ minds is whether this sporting goods behemoth will be able to deliver a positive earnings surprise in the quarter to be reported. The company delivered a positive earnings surprise in the preceding quarter. Let’s see how things are shaping up prior to this announcement.

Adidas AG Price and EPS Surprise

Adidas AG Price and EPS Surprise | Adidas AG Quote

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 67 cents, reflecting year-over-year decline of roughly 18%. We noted that our earnings estimate has remained stable over the last 30 days. Further, analysts polled by Zacks expect revenues of $5.6 billion, up about 11.1% from the year-ago quarter.

Adidasforms part of the Consumer Discretionarysector. Per the latest Earnings Trends, the Consumer Discretionary sector’s earnings are expected to remain flat year over year, while revenues are projected to grow 8.1%.

Factors at Play

Adidas’ shares have gained 37.8% in the last one year, outperforming the industry’s growth of 4.8%. The company has been buoyed by continued revenues growth at its Adidas brand, particularly in North America. In the last quarter, revenues at Adidas grew 36%, driven by strength noted across the training and running categories. Also, the company has been gaining from its impressive women’s business. Together, these growth drivers along with the company’s constant product launches and strong marketing initiatives make us hopeful about the company’s prospects. However, management remained dissatisfied with its performance in Russia in the last quarter, which was hurt by unfavorable pricing. Apart from this, the company continues to fight a tough macroeconomic landscape in Brazil and Argentina.

Nevertheless, Adidas recently posted its preliminary results for the second quarter, wherein revenues from continuing operations surged 19% on a currency neutral basis. Moreover, net income from continuing operations rose 16%, driven by solid revenues, enhanced gross margin and operating expense leverage. Encouraged by a strong first-half 2017, management raised its outlook for the full year. The company now anticipates currency neutral revenues to grow 17–19%, compared with the old guidance of 12–14%. Net income from continuing operations is now envisioned to increase 26–28% to roughly €1.36–€1.39 billion. Earlier, the company had forecasted the same to grow 13–15% to approximately €1.2–€1.23 billion. All said, let’s wait and see if Adidas can manage to put up another impressive show this time.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Adidas is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Adidas currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00% as both, the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 67 cents. The combination of Adidas’ Zacks Rank #2 and ESP of 0.00% makes surprise prediction difficult.

Stocks with Favorable Combination

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:

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +0.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +0.50% and a Zacks Rank #3.

Nordstrom, Inc. (JWN - Free Report) has an Earnings ESP of +3.28% and a Zacks Rank #3.

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