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Will Ralph Lauren (RL) Strategies Aid in Topping Q2 Earnings?

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We expect the designer, marketer and distributor of premium lifestyle products, Ralph Lauren Corporation (RL - Free Report) to beat expectations when it reports second-quarter fiscal 2018 results on Nov 2. In the last quarter, the company delivered a positive earnings surprise of 15.6%.

In fact, the company has recorded an average positive surprise of 13.4% in the last four quarters, surpassing estimates in each quarter.

What to Expect?

The question lingering in investors’ minds now is whether Ralph Lauren will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $1.90 per share, which is flat with the year-ago quarter. We note that the Zacks Consensus Estimate for the quarter and the fiscal have moved up in the last 30 days. Analysts polled by Zacks anticipate revenues of $1.65 billion, down 9.2% from the year-ago quarter.

Moreover, we note that the stock has outperformed the industry in the last three months. The company’s shares have increased 21.6%, while the industry grew 3.6%.



Factors at Play

Ralph Lauren has been putting up a good show of late. The company’s progress on its Way Forward Plan and other Restructuring initiatives are primarily behind this feat. Driven by these attributes, the company has delivered a robust earnings surprise history.

The company’s first-quarter fiscal 2018 performance was a testimony to its progress on the Way Forward Plan and Restructuring initiatives that was announced in June 2016. Notably, first-quarter fiscal 2018 marked its 10th consecutive earnings beat. Further, the company has delivered positive earnings surprises in 15 out of the last 16 quarters.

Going forward, management remains confident of Ralph Lauren’s performance based on its efforts related to global brand reorganization, constant infrastructural investments and e-commerce enhancements. Further, the company’s focus on product evolution and marketing bode well. Additionally, management lowered effective tax rate forecast for fiscal 2018, which we believe should benefit the bottom line.

However, concerns regarding soft sales trend on account of weak demand, brand exits and efforts to drive quality of sales cannot be ignored. Additionally, foreign currency continues to adversely impact Ralph Lauren’s top-line and margins.

Nonetheless, we expect the company’s growth strategies to aid it in sailing through these headwinds.

What the Zacks Model Unveils?

Our proven model shows that Ralph Lauren 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. Earnings ESP of +2.63% and the company’s Zacks Rank #2 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.

Other Stocks Poised to Beat Earnings Estimates

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

Gildan Activewear Inc. (GIL - Free Report) currently has an Earnings ESP of +2.14% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hain Celestial Group, Inc. (HAIN - Free Report) currently has an Earnings ESP of +5.22% and a Zacks Rank #2.

Inter Parfums, Inc. (IPAR - Free Report) has an Earnings ESP of +3.56% and a Zacks Rank #2.

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