The earnings season is off to a good start and the picture so far appears to be quite encouraging. Per the Earnings Preview dated Jul 20, 87 of the S&P 500 members have reported results. Out of these S&P 500 companies, approximately 86.2% delivered positive earnings surprises, while 77% beat top-line expectations.
Further, earnings for these companies have advanced 20.9% from the same period last year, with revenues up 10.3%. While results announced so far showcase year-over-year growth in both top and bottom lines, the pace of the same has decelerated sequentially.
Further, the report suggests that earnings for the total S&P 500 companies for this quarter are projected to improve 21% year over year, with total revenues rising 8.3%. Thus, the overall picture looks favorable for this reporting cycle.
The performance of the index is determined by all 16 Zacks sectors, out of which 14 are estimated to witness year-over-year earnings growth. The Consumer Discretionary
sector, which also houses major apparel stocks, seems to be one of them. Per the report, the sector is likely to witness earnings growth of 10.7% and revenue increase of 6.1% this earnings season. A Look at Textile-Apparel Industry
The Zacks Textile-Apparel Industry
is currently ranked among the top 9% (24 of 256) of all Zacks Industries. Apart from practicing stringent cost-containment, the players in the industry are focused on expanding digital capacities, which is likely to remain a major driver. Further, consumers' rising inclination for sports and fitness activities bodes well for various players in this space. We also note that while some textile-apparel stocks are bearing the brunt of strained gross margins and increased costs to support store and international expansion, others with solid financial backing and effective strategic plans are outperforming.
The industry has outperformed both the S&P 500 and its own sector over the past six months. While the stocks in this industry have collectively gained 14.1%, the Zacks S&P 500 Composite and Zacks Consumer Discretionary Sector have rallied 5.6% and 6.5%, respectively.
So, let's see what awaits the following Apparel stocks that are queued up for the earnings releases on Jul 26.
Well, our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP , the chance of a positive earnings surprise is high. You can uncover the best stocks to buy or sell, before they're reported with our Earnings ESP Filter .
COLM, DECK Likely to Beat: Let's see How
Known for sourcing, marketing, designing, and distributing outdoor and active lifestyle apparel, footwear, accessories and equipment, Columbia Sportswear Company COLM , currently has a Zacks Rank #1 and an Earnings ESP of +19.90%. The current Zacks Consensus Estimate for the quarter under review is pegged at a loss of 10 cents. We note that a favorable Zacks Rank coupled with a positive ESP makes us confident of a beat. You can see the complete list of today's Zacks #1 Rank stocks here .
Columbia Sportswear Company Price, Consensus and EPS Surprise
Columbia Sportswear Company Price, Consensus and EPS Surprise | Columbia Sportswear Company Quote
Columbia Sportswear remains poised to gain from its Project CONNECT program that was announced last year, with the intention of enhancing the company's performance. Also, the company is set to gain from its innovative marketing techniques, which will further strengthen its presence in the apparel industry. Additionally, Columbia Sportswear's widespread global reach provides the company with a solid business foundation and enables it seek new opportunities to enhance profitability. However, Columbia Sportswear remains prone to volatility in the prices of several raw materials. (Read More: What's in Store for Columbia Sportswear in Q2 Earnings? )
Now, let's assess Deckers Outdoor Corporation DECK , which is also scheduled for tomorrow. Like the above-mentioned company, this stock is also likely to beat, given its Zacks Rank #2 and an Earnings ESP of +0.47%. The current Zacks Consensus Estimate is pegged at a loss of $1.42. Well, Deckers is engaged in designing, marketing and distributing innovative and niche footwear, apparel and accessories developed for high performance and other lifestyle-related activities.
Deckers Outdoor Corporation Price, Consensus and EPS Surprise
Deckers Outdoor Corporation Price, Consensus and EPS Surprise | Deckers Outdoor Corporation Quote
Deckers is targeting profitable markets and remains focused on product innovations as well as store augmentation plans. Further, the company's focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution bode well. Additionally, the company has undertaken strategic initiatives in an effort to drive long-term growth. Its store-fleet optimization plan focuses on striking the right balance between digital and physical stores. Nonetheless, Deckers' over-reliance on its UGG brand also remains a concern. (Read more: Check Out Deckers Probability to Beat in Q1 Earnings )
Here's Why UAA & CRI Have Slim Chances to Beat
Under Armour UAA , along with its subsidiaries, is a leading developer, designer, and distributor of authentic athletic footwear, apparel, and accessories for a wide variety of sports and fitness activities, set to report second-quarter results. While the company currently carries a Zacks Rank #1 (Strong Buy), our earnings beat criteria was let down by its Earnings ESP of -3.08%.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote
Under Armour's sustained focus on brand development and expansion of direct-to-consumer (DTC) and technology-based fitness businesses bode well. The company has been trying to boost its DTC business through store expansion initiatives and enhancement of its e-commerce platform. However, the company continues to see sluggishness in the North American business. (Read More: What's Under Armour Probability to Beat in Q2 Earnings )
Taking a sneak-peek at the earnings beat criteria for Carter's CRI , we note that the company is involved in designing, sourcing and marketing branded apparel and related products for babies, and young children, primarily in North America. Carter's has an Earnings ESP of +2.30% but a Zacks Rank #4 (Sell), makes surprise prediction difficult. However, we prefer to wait and see what's in the cards for this apparel stock, the Zacks Consensus Estimate for which is pegged at 54 cents.
Carter's, Inc. Price, Consensus and EPS Surprise
Carter's, Inc. Price, Consensus and EPS Surprise | Carter's, Inc. Quote
Carter's remains poised on its strong product offerings, investments in brand marketing and e-commerce capabilities, and gains from the new tax reform. Nevertheless, higher SG&A expenses, due to continued investments in business growth and new initiatives, are weighing on the operating margin. (Read More: Factors Setting the Tone for Carter's Q2 Earnings )
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carter's, Inc. (CRI): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report Columbia Sportswear Company (COLM): Free Stock Analysis Report Under Armour, Inc. (UAA): Free Stock Analysis Report To read this article on Zacks.com click here.