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Coach (COH) Q2 Earnings May Disappoint: Will Stock Suffer?

Of late, Textile-Apparel industry has been under pressure, and Coach, Inc.COH , which belongs to this industry, has not been an exception to this trend. So investors are quite skeptical about the company's second-quarter fiscal 2017 results. We have noted that in the past six months, the stock has plunged 18.1%, while the overall industry has witnessed a decline of 19.5%. However, the broader Consumer Discretionary sector of which both are part of, has gained 5.6% in the same time frame.

Per the latest Earnings Trends report as of Jan 20, Consumer Discretionary sector is likely to witness earnings growth of 3.4% and revenue increase of 13.2%. Let's take a closer look as to how Coach is expected to contribute to the sector's performance.

What to Expect from Coach?

This designer and marketer of fine accessories and gifts as well as house of lifestyle brands is expected to report results on Jan 31, 2017. The question lingering in investors' minds is, whether Coach will be able to continue with its positive earnings surprise streak in the quarter to be reported. The company's past performance reveals that it surpassed the Zacks Consensus Estimate in the trailing four quarters by an average of 6.7%.

The current Zacks Consensus Estimate for the quarter is 74 cents, which reflects an increase of over 8% from the year-ago quarter. Analysts polled by Zacks expect revenue of $1.32 billion.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Coach is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1(Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Coach has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 74 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing this Quarter

A mature domestic market, foreign currency headwinds and cautious consumer spending remain causes of concern. Fashion obsolescence also remains the primary concern for the company's business model. Moreover, Coach sells products that are discretionary in nature and consequently, depends upon consumers' disposable income, which is sensitive to macroeconomic factors.

Nevertheless, Coach is undergoing a brand transformation and introducing modern luxury concept stores in key markets. The acquisition of Stuart Weitzman has been accretive to its performance and is being viewed as a significant step in its efforts toward becoming a multi-brand company. Moreover, management has undertaken transformation initiatives revolving around product, stores and marketing, which are likely to have a favorable impact in the quarter to be reported.

Coach, Inc. Price, Consensus and EPS Surprise

Coach, Inc. Price, Consensus and EPS Surprise | Coach, Inc. Quote

Stocks Poised to Beat Earnings Estimates

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:

Tractor Supply Company TSCO has an Earnings ESP of +1.09% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Michael Kors Holdings Limited KORS has an Earnings ESP of +2.45% and a Zacks Rank #2.

Yum! Brands, Inc. YUM has an Earnings ESP of +2.82% and a Zacks Rank #3.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?

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Yum! Brands, Inc. (YUM): Free Stock Analysis Report

Tractor Supply Company (TSCO): Free Stock Analysis Report

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

Michael Kors Holdings Limited (KORS): 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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