Back to top

Image: Bigstock

Is Gap (GPS) Set to Beat Earnings Estimates?

Read MoreHide Full Article

Several industry headwinds, many of which were sparked by Amazon (AMZN - Free Report) and the rise of e-commerce, forced brick-and-mortar retailers like Nordstrom (JWN - Free Report) and Target (TGT - Free Report) to adapt their businesses in order to survive.

These moves have caused some investors to stay away from retailers in recent years. However, like any industry or stock, there are no guarantees in retail. Investors must always focus on the stock’s current fundamentals in order to gauge its possible performance.

For example, Gap (GPS - Free Report) is expected to see its sales climb by 5.45% to $4.67 billion in the fourth quarter, which includes the crucial holiday shopping period. But top-line growth for an established company such as Gap is not enough to excite investors on its own.

The retailer is also projected to see its quarterly earnings hit $0.59 per share, up more than 15% year over year. Yet, investors will need to see more in order to know if they should expect Gap to actually top this solid EPS estimate.

Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to beat. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Gap is currently a Zacks Rank #2 (Buy) and sports an “A” grade for Value in our Style Scores system. Coupled with its Earnings ESP of 0.15%, which means earnings estimates have been higher directly ahead of Gap’s Q4 results, investors should consider the stock as one that could beat earnings estimates.

Investors should also note that Gap has topped or matched earnings estimates in the trailing 12 quarters, including beats of 5.45%, 11.54%, and 24.14% over the last three periods, respectively

Gap is set to report its Q4 and fiscal 2017 earnings results after market close on Thursday, March 1.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


See More Zacks Research for These Tickers


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


Amazon.com, Inc. (AMZN) - free report >>

Target Corporation (TGT) - free report >>

Nordstrom, Inc. (JWN) - free report >>

The Gap, Inc. (GPS) - free report >>