The Gap, Inc.
) is set to declare second-quarter 2013 results on Aug 22. In the
last quarter, the company's earnings surpassed the year-over-year
earnings by 51.1% and the Zacks Consensus Estimate by 2.9%. Let
us now look at how things have developed for the imminent
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Growth Factors in the Past Quarter
The year-over-year improvement in the first quarter results was
driven by robust top-line growth and improved margins. Gap
witnessed considerable recovery in its comparable sales and total
sales performances, driven by its consistent endeavors to remain
buoyed on the growth trajectory. Moreover, Gap was successful in
controlling operating expenses. The company is taking a balanced
approach in reviving its brands, while keeping its focus on
controlling inventories and maximizing gross profits.
Our proven model does not conclusively project Gap as beating
earnings this quarter. A stock needs to have both a positive
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, 2 or 3 to surpass earnings estimates.
However, that is not the case here due to the following factors:
ESP for Gap is 0.00% since the Most Accurate Estimate stands at
64 cents, which is in line with the Zacks Consensus Estimate.
Zacks #2 Rank (Buy):
Gap's Zacks Rank #2 increases the forecasting power of ESP.
However, we also need to have a positive ESP to be confident of
an earnings surprise call. We caution against stocks with Zacks
Rank #4 and 5 (Sell rated stocks) going into earnings
announcement, especially when the company is undergoing negative
Other Stocks to Consider
Gap is not the only firm we are looking up to this earnings
season. Our model shows that the following stocks have the right
combination of elements to post an earnings beat this quarter:
Citi Trends, Inc.
), Earnings ESP of +2.33% and a Zacks Rank #2 (Buy).
New York & Company Inc.
), Earnings ESP of +33.33% and a Zacks Rank #3 (Hold).
), Earnings ESP of +4.17% and a Zacks Rank #3 (Hold).