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How Michael Kors (KORS) Looks Just Ahead of Q2 Earnings

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Michael Kors Holdings Limited is slated to release second-quarter fiscal 2019 results on Nov 7. In the trailing four quarters, this global luxury lifestyle company has outperformed the Zacks Consensus Estimate by an average of 35.7%. In the last reported quarter, the company delivered a positive earnings surprise of 40.4%.

Investors are counting on another beat by Michael Kors in the to-be-reported quarter. Let’s delve deeper and take a look at the factors likely to influence the results.

How Are Estimates Shaping Up?

The Zacks Consensus Estimate for the quarter under review is pegged at $1.09, reflecting a significant decline from $1.33 reported in the year-ago period. We note that the Zacks Consensus Estimate has remained stable in the last 30 days.

Analysts polled by Zacks now project revenues of $1,267 million, up about 10% from the year-ago quarter. If all goes well, this will be the seventh straight quarter of top-line beat.

Michael Kors Holdings Limited Price, Consensus and EPS Surprise


Michael Kors Holdings Limited Price, Consensus and EPS Surprise | Michael Kors Holdings Limited Quote

Factors Likely to Influence Performance

Michael Kors’ commitment toward deploying resources to expand product offerings, build “shop-in-shops”, and upgrading its information system and distribution infrastructure is likely to drive sales. Moreover, “Runway 2020” plan, cost containment efforts, inventory management, accretive acquisitions such as that of Jimmy Choo and Versace, and focus on the e-commerce platform bode well for the stock.

The company is also expanding its product mix beyond handbags, into men’s, footwear and women’s ready to wear. The company is focused on enhancing business from the men’s category either through standalone stores or by adding offerings in existing lifestyle outlets in North America, Europe and Asia. Moreover, it remains optimistic about Michael Kors ACCESS wearable technology line of watches and fitness trackers, as the category provides ample growth opportunity.

However, management had earlier projected wholesale revenue to decline in the low-single-digits and licensing revenue to fall in the high-single-digits during the second quarter. The company had also earlier forecast second-quarter earnings in the band of $1.03-$1.08 per share, including dilution from Jimmy Choo of approximately 9-11 cents.

The bottom-line expectation depicts the earlier wholesale shipments of about $35 million in revenues into the first quarter and shift of operating expenses of roughly $15 million into the second quarter. Operating margin is likely to contract 470 basis points to 16% during the quarter under review.

What the Zacks Model Unveils?

Our proven model shows that Michael Kors is likely to beat estimates this quarter. This is because 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.

Michael Kors has an Earnings ESP of +0.64% and a Zacks Rank #3. This makes us reasonably confident that the bottom line is likely to outperform estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

3 Other Stocks With Favorable Combination

Here are three 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:

American Eagle Outfitters (AEO - Free Report) has an Earnings ESP of +2.95% and a Zacks Rank #3.

NIKE, Inc. (NKE - Free Report) has an Earnings ESP of +0.86% and a Zacks Rank #3.

Zumiez (ZUMZ - Free Report) has an Earnings ESP of +0.41% and a Zacks Rank #3.

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