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Apparel Stocks to Release Earnings on Feb 2: HBI, RL, DECK

While the fourth-quarter earnings season has picked up pace, there are still many companies in the consumer staple sector that are yet to report. If we look into the companies that have reported results so far, we note that as of Jan 30, 171 S&P 500 members have reported their quarterly numbers. Total earnings for these members are up 6% on 3.1% higher revenues, with 64.3% beating EPS estimates and 54.4% coming ahead of top-line expectations, as per the latest Earnings Trend report.

With the improvement and growth in the U.S. and global economy, investors seem to be happy that Q4 is on track to record the best performance in the last eight quarters. Earnings growth has also improved compared with the last few years. At present, sectors including finance, technology, construction, industrial products, basic materials and consumer discretionary look promising and are delivering improved growth in the current quarter. However, the pace of growth is currently modest and positive earnings surprises are not clearly visible.

In the consumer discretionary sector, apparel stocks also posted mixed results. While Coach, Inc. COH topped second-quarter fiscal 2017 earnings, revenues were in line with the Zacks Consensus Estimate. Baltimore-based Under Armour, Inc. UA delivered weaker-than-expected earnings and revenues in fourth-quarter 2016.

Let's see what awaits these three apparel stocks, which are scheduled to release their quarterly numbers on Feb 2.

Deckers Outdoor Corp.DECK , a leading designer, producer and brand manager of innovative, niche footwear and accessories, is slated to report third-quarter fiscal 2017 results on Feb 2 after the market closes . Last quarter, it posted a positive earnings surprise of 3.4%. It has delivered an average positive earnings surprise of 25.2% over the trailing four quarters. The company has an Earnings ESP of 0.71% and a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Our proven model shows that Deckers Outdoor is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 for this to happen. The Most Accurate estimate stands at $4.27, while the Zacks Consensus Estimate is pegged at $4.24. So the ensuing difference - the Earnings ESP - is of +0.71%. A positive ESP combined with the company's Zacks Rank #3, makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Deckers' focus on expanding its brand assortments, bringing more innovative line of products, targeting consumers digitally via marketing and sturdy eCommerce, and optimizing omni-channel distribution bode well. These initiatives not only aided the stock to outperform the Zacks categorized industry so far in the past one year but also helped post positive earnings surprise for the sixth straight quarter. (Read more: Deckers Outdoor Q3 Earnings: Is a Beat in Store? ).

We noted that Deckers' shares have increased 17.6% in the past one year period, compared with the Zacks categorized Shoes & Retail Apparel industry that witnessed a decline of 14.4%. Notably, the industry is part of the bottom 45% of the Zacks Classified industries (145 out of the 265). The broader Consumer Discretionary sector is placed at the bottom 25% of the Zacks Classified sectors (12 out of 16).

Ralph Lauren CorporationRL is slated to report third-quarter fiscal 2017 results on Feb 2 before the market opens. Last quarter, the company delivered a positive earnings surprise of 11.8%. In fact, the company has outperformed the Zacks Consensus Estimate by an average of 11.1% over the trailing four quarters.

The company has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.64 per share. It has a Zacks Rank #4 (Sell).

As it is we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Ralph Lauren has provided a soft outlook for the third-quarter and fiscal 2017 with its last reported results. Revenue growth for both periods is expected to be impacted by the company's actions to improve the quality of sales, lowered inventory buys, store closures, price management and other initiatives. Also, foreign currency is expected to have an adverse impact on revenues, though by a minimal amount. Further, the company's margins are expected to be hurt by a rise in new store expenses, negative currency impacts, infrastructure investments and fixed expense deleverage. (Read more: Ralph Lauren Q3 Earnings: Will the Stock Disappoint? ).

Moreover, the company's stock price movement depicts a bearish picture. Evidently, Ralph Lauren's shares have declined 21.3% in the past one year, underperforming the Zacks categorized Textile - Apparel Manufacturing industry's drop of 16.1%. Notably, the industry is part of the bottom 14% of the Zacks Classified industries (228 out of the 265).

Next in consideration is Hanesbrands Inc.HBI which is set to report fourth-quarter 2016 results on Feb 2, after the closing bell. Last quarter, the company posted in-line results. In the trailing four quarters, the company has reported in-line results in one, negative surprises in two and positive surprise in one, with an average beat of 2.98%.

The company has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 57 cents per share. It has a Zacks Rank #4. We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Hanesbrands is consistent with its innovations that help it to maintain market share as well as a loyal customer base. However, it is currently plagued with currency headwinds, soft sales in the Activewear and direct-to-consumer segments, and a lackluster performance of the Champion brand. Notably, the company has also lowered its 2016 guidance as it anticipates soft results in the upcoming fourth quarter. (Read more: Hanesbrands Q4 Earnings: Stock Likely to Disappoint? ).

In the past one year, the shares of this retailer have declined 24%, underperforming the Zacks categorized Textile-Apparel Manufacturing industry which has declined only 16%.

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Deckers Outdoor Corporation (DECK): Free Stock Analysis Report

Coach, Inc. (COH): Free Stock Analysis Report

Under Armour, Inc. (UA): Free Stock Analysis Report

Ralph Lauren Corporation (RL): Free Stock Analysis Report

Hanesbrands Inc. (HBI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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