Back to top

Is a Beat in the Cards for Wolverine (WWW) in Q2 Earnings?

Read MoreHide Full Article

Wolverine World Wide Inc. (WWW - Free Report) is scheduled to report second-quarter 2018 results on Aug 8, before the market opens. In the last quarter, the company delivered a positive earnings surprise of 35.1%. Let’s see how things are shaping up prior to this announcement.

Which Way Are Top & Bottom-Line Estimates Headed?

After registering a bottom-line surge of 35% in the first quarter of 2018, Wolverine is likely to record year-over-year growth of 4.7% in the second quarter as well. This is quite evident from the Zacks Consensus Estimate for the quarter under review, which is pegged at 45 cents compared with 43 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has remained stable in the last 30 days.

Wolverine has a remarkable history in terms of the bottom and top lines as both sales and earnings have surpassed the consensus mark in five out of the last six quarters. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 24.9%.

The Zacks Consensus Estimate for revenues of $570.2 million indicates a decline of 4.8% from the year-ago quarter. We note that total revenues of this Michigan-based company decreased 9.7% in the last reported quarter.

Well, the obvious question that comes to mind is whether Wolverine will be able to sustain its positive earnings surprise streak in the second quarter of 2018. Though the past trend indicates a positive surprise, it will not be wise to jump to a conclusion without analyzing the factors at play.

Wolverine World Wide, Inc. Price and EPS Surprise

Factors Influencing Q2

Wolverine is on track with its GLOBAL GROWTH AGENDA, which focuses on empowering brands through innovation, implementing advanced digital tools and expanding into new markets. This move aims at driving growth and profitability amid a competitive market scenario. This growth initiative is expected to expand gross margin for 2018 in a band of 50-90 bps compared to the prior view of a 40-80 bps increase.

Along with this, the company is trying to enhance its e-commerce business, which is already booming. The company has been utilizing its digital capabilities to enhance speed of information and product flow. This led to growth of nearly 25% in the first quarter of 2018. Further, the company plans to allocate close to 30% of its incremental investments in order stay on track with such robust advancements.

The company is making efforts to strengthen its international business that comprises widespread network of global partners. Going ahead, the company plans to add greater strategic resources to strengthen its regional teams, especially in the emerging markets of the Asia-Pacific region. Further, to fuel the growth of the company’s brands internationally, Wolverine plans to allocate close to 25% of its incremental investments. Such efforts will help the company achieve a high-single digit growth in revenues from its international business in 2018.

However, Wolverine has been witnessing dismal top-line performance since the past few quarters. The company has registered a year-over-year decline over the last three quarters, mainly due to change in quarterly calendars, negative impacts of store closures and portfolio changes made in early 2017. Moreover, the company remains exposed to significant currency risks stemming from international markets.

What the Zacks Model Unveils

Our proven model shows that Wolverine is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).   You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Wolverine has an Earnings ESP of +0.74% and carries a Zacks Rank #3. This makes us reasonably confident of an earnings beat.

Other Stocks With Favorable Combination

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

American Eagle Outfitters (AEO - Free Report) has an Earnings ESP of +4.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nike Inc. (NKE - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3.

lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +0.88% and a Zacks Rank #3.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>



More from Zacks Analyst Blog

You May Like