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Key Factors Shaping Urban Outfitters (URBN) Q1 Earnings

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Urban Outfitters, Inc. (URBN - Free Report) is slated to release first-quarter fiscal 2019 results on May 22. In the trailing four quarters, this lifestyle products and services company has outperformed the Zacks Consensus Estimate by an average of 8.5%. In the last reported quarter, the company delivered a positive earnings surprise of 9.5%.

Investors are counting on another estimate beat by Urban Outfitters in the to-be-reported quarter. Let’s delve deep and take a look at the factors that will be influencing the results.

Here Are the Deciding Factors

Solid Fundamentals Raises Earnings Beat Probability

Despite a competitive retail landscape, Urban Outfitters has emerged strongly on its strategic initiatives such as store-expansion efforts, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. Management is aggressively focusing on efforts to enhance the performance of its brands through store refurbishment and by bringing in more compelling assortments. The company is also investing in shop-in-shops.

Being a multi-brand and multi-channel retailer, Urban Outfitters offers flexible merchandising strategy. The company also has a significant domestic and international presence with rapidly expanding e-commerce activities. The company remains committed to improve comparable-store sales performance, sustain investments in direct-to-consumer business, enhance productivity in existing channels, add new brands and optimize inventory level.

Which Brand is Going to Play a Vital Role?

Given the aforementioned tailwinds, analysts polled by Zacks expect positive momentum in comparable store sales to continue in the quarter under review. Comparable retail segment net sales, including the comparable direct-to-consumer channel, are likely to be up 8.2% year over year. Moreover, comparable retail segment net sales are expected to rise roughly 8% at both Urban Outfitters and Anthropologie Group and 9.3% at the Free People.

Management had earlier hinted that comparable retail segment’s net sales are off to a solid start during the first quarter of fiscal 2019. Based on that sales trend, the company projected gross margin rate to improve approximately 100 basis points during the first quarter on a year-over-year basis.

A consensus reached on the basis of analysts’ estimates polled by Zacks shows that net sales are likely to improve 8%, 9%, 13% and 3% year over year at Urban Outfitters, Anthropologie Group, Free People and Food and Beverage, respectively.

Clearly, all the four brands hold key to the company’s favorable outcome.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise


Urban Outfitters, Inc. Price, Consensus and EPS Surprise | Urban Outfitters, Inc. Quote

How Are Top & Bottom Line Estimates Faring?

After registering a bottom-line increase of 25.5% in the final quarter of fiscal 2018, Urban Outfitters is likely to record year-over-year growth of more than 100% in the first quarter of fiscal 2019 as well. The Zacks Consensus Estimate for the quarter under review is pegged at 30 cents compared with 13 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has increased by a penny in the last 30 days. Analysts polled by Zacks now project revenues of $835.4 million, up from $761.2 million in the year-ago quarter.

If all goes well, this will be the fourth straight quarter that the company will surpass the Zacks Consensus Estimate for both the top and bottom lines.

What Does the Zacks Model Unveil?

Our proven model shows that Urban Outfitters is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Urban Outfitters has a Zacks Rank #2 and an Earnings ESP of +1.70%. This makes us reasonably confident of an earnings beat.

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 earnings beat.

Best Buy (BBY - Free Report) has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target (TGT - Free Report) has an Earnings ESP of +0.32% and a Zacks Rank #3.

Kroger (KR - Free Report) has an Earnings ESP of +4.99% and a Zacks Rank #3.

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