Factors Setting the Tone for Guess?'s (GES) Q3 Earnings

Guess?, Inc. GES is scheduled to release third-quarter fiscal 2020 results on Nov 26. This renowned textile-apparel designer delivered a positive earnings surprise of nearly 31% in the last reported quarter.

The Zacks Consensus Estimate for third-quarter earnings has moved up by a penny in the past 30 days to 19 cents per share. This suggests an increase of 46.2% from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $619.8 million, which indicates a rise of 2.4% from the figure reported in the year-ago quarter.

Guess?, Inc. Price and EPS Surprise

Guess?, Inc. Price and EPS Surprise

Guess?, Inc. price-eps-surprise | Guess?, Inc. Quote

Key Factors

Guess? has been gaining from solid sales at Europe for a while. Consistent strength in the region along with lower logistic costs and reduced promotional activities are likely to have contributed to operating margin in the to-be-reported quarter. In the last earnings call, management projected operating margin expansion of at least 125 basis points (bps) for Europe in the second half of fiscal 2020, courtesy of lower logistic costs. This is likely to have reflected in Guess?’s margins in the quarter under review. Also, continued gains from initial mark-ups are likely to have aided third-quarter gross margin.

However, rising SG&A expenses stemming from high advertising investment are expected to have affected the company’s third-quarter performance. Apart from this, Guess? has been witnessing sluggishness in Asia for the past few quarters due to broad-based softness and sluggish customer traffic in significant markets like China, Korea and Japan.

Moreover, Guess? has been battling adverse currency fluctuations. Management anticipates currency headwinds of 2.5 percentage points to have made a negative impact on revenues in the third quarter.
What the Zacks Model Unveils

Our proven model predicts an earnings beat for Guess? this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Guess? has an Earnings ESP of +1.78% and a Zacks Rank #2.

Other Stocks With Favorable Combination
Here are other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:

Dollar General DG has an Earnings ESP of +2.34% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group GIII has an Earnings ESP of +0.94% and a Zacks Rank #2.

lululemon athletica LULU has an Earnings ESP of + 0.73% and a Zacks Rank #3.

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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.

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