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Climbing Category Sales to Boost Clarus (CLAR) Q2 Earnings

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Clarus Corporation (CLAR - Free Report) is slated to report second-quarter 2018 results on Aug 6, after the closing bell.

We expect the company to have performed well in the second quarter, backed by growing strength in its Black Diamond Equipment brand and increased contribution from the acquisition of Sierra Bullets, L.L.C.

Notably, shares of the company have rallied 29.5% in the past year, outperforming the industry’s collective growth of 21.9%.

Let’s have a look at the factors that are likely to have influenced the company’s second-quarter results.


Top Line Likely to Gain

In the first quarter of 2018, Clarus recorded year-over-year sales growth of 28%, primarily benefitting from the acquisition of Sierra Bullets, L.L.C. Excluding the positive synergies of the acquisition, Clarus’ revenues grew 8% from the year-ago quarter. The improvement in the top line is expected to have continued in the second quarter as well.

The top-line momentum can be attributed to strength in the company’s climbing categories, which grew 20%, driven by new climbing shoes and the continued growth in harnesses, ropes, helmets, and climbing accessories. Demand has also been strong in the apparel category.

Subsequently, the Zacks Consensus Estimate for second-quarter sales is pegged at $40.8 million, suggesting 33% year-over-year growth.

Strong Margins to Favor Bottom Line

The strong top-line momentum in the first quarter translated itself to an improvement of 390 basis points in gross margins and is expected to have benefitted second-quarter margins as well. Moreover, we believe that integration of Sierra, favorable product and distribution mix, and continued improvement within sourcing and manufacturing activities should continue to drive margin growth in the second quarter and thereby, aid the bottom line. Consequently, the consensus estimate predicts loss of a penny in the second quarter, up from loss of 11 cents in the year-ago period.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  The sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Clarus presently has a Zacks Rank #3 (Hold) and an Earnings ESP of +100.00%, a combination indicating that the company is likely to beat estimates this time around.

Clarus Corporation Price and EPS Surprise

Other Stocks to Consider

Here are some other stocks from the Consumer Discretionary sector that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat in the to-be-reported quarter:

SeaWorld Entertainment (SEAS - Free Report) has an Earnings ESP of +20.99% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Aug 6.

Norwegian Cruise (NCLH - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3. The company is slated to report quarterly numbers on Aug 9.

Madison Square Garden (MSG - Free Report) has an Earnings ESP of +11.47% and a Zacks Rank #3. The company is expected to report quarterly numbers on Aug 16.

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