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Factors Impacting Columbia Sportswear's (COLM) Q3 Earnings

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Columbia Sportswear Company (COLM - Free Report) is scheduled to release third-quarter 2017 results on Oct 26, after the markets close. While the company is expected to gain from sturdy performance in its Europe-direct business and prAna brand, results are likely to be hurt by declines across the United Sates, Latin America and Asia Pacific regions. As a result, both top and bottom lines depict a probable year-over-year decline.

Let’s now have a closer look at how things are shaping up prior to this announcement.

Europe-Direct Business and prAna Brand to Continue Growth

Columbia Sportswear has been witnessing stellar performance in its Europe-direct business for some time.  In fact, the wholesale, brick-and-mortar and e-commerce channels across the Europe-direct business have depicted sustained growth during the first-half of 2017.

Owing to this trend, analysts polled by Zacks expect sales from the Europe, Middle East and Africa (EMEA) regions to inch up 2.7% year over year to $75 million. Similarly, net sales from Canada are also expected to grow 1.3% to $76 million owing to strong performance of the company’s core brands.

From a brand perspective, we note that Columbia Sportswear’s prAna brand has been attracting a large consumer base. The current Zacks Consensus Estimate of revenue for prAna brand is $38.1 million, almost in line with the prior-year figure.

Headwinds Impacting Revenue

Analysts polled by Zacks expect net sales from United States and Latin America and Asia Pacific (LAAP) regions to decline 2.5% and 0.9% respectively during the third quarter.

Of late, the company has been facing challenges in the domestic region, especially in the wholesale front, mainly due to store closures, bankruptcies, or plans to restructure or liquidate. This has led to lower-than-expected advance orders for fall 2017 from U.S. wholesale customers.

Revenues in the LAAP region have also witnessed challenges lately, owing to lower sales in Korea. There has been a general shift of consumer preference away from outdoor apparel and accessories in Korea. Also, the consensus estimate of revenues for the SOREL brand is $86 million, reflecting a year-over-year decline of 1.8%.

Owing to such headwinds, analysts polled by Zacks expect total revenues of $734.9 million for the said quarter, down 1.4% from the year-ago period.

These ongoing challenges are also visible in Columbia Sportswear’s share price performance. Shares of the company have underperformed the industry in the past six months. The stock has returned 4.8% compared with the industry’s gain of 10.9%.  

 

Earnings Expectations

The expected decline in revenues across some of its core regions and brands has led to a bleak earnings view. The Zacks Consensus Estimate of $1.15 for the third quarter depicts a decline of 2.7% from the year-ago period.

However, estimated earnings for 2017 of $2.78 per share depict a growth of 2.2% from the year-ago figure and are in line with management’s guidance of $2.74-$2.84. Estimates for both the quarter under review as well as fiscal 2017 have remained stable over the past 30 days.

We note that Columbia Sportswear has delivered an average positive surprise of 12.3% in the trailing four quarters. Notably, the company’s earnings have outpaced the Zacks Consensus Estimate in 18 straight quarters.

Columbia Sportswear Company Price, Consensus and EPS Surprise

What Does the Zacks Model Say?

Our proven model does not conclusively show that Columbia Sportswear is likely to beat earnings estimates this quarter. This is because 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. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Columbia Sportswear currently carries a Zacks Rank #3, it has an Earnings ESP of -0.71%. We need to have a positive ESP to be confident about a beat.

Stocks with Favorable Combinations

Here are some companies, which according to our model, have the right combination of elements to post an earnings beat:

PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.15% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wynn Resorts Ltd. (WYNN - Free Report) has an Earnings ESP of +3.38% and holds a Zacks Rank #2.

Ralph Lauren Corp. (RL - Free Report) has an Earnings ESP of +2.63% and carries a Zacks Rank #2.

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