Gap (GPS) Q4 Earnings: What's in the Cards for the Stock?

The Gap, Inc.GPS is scheduled to release fourth-quarter fiscal 2016 results on Feb 23. The big question facing investors is, whether this premier specialty retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company's earnings came in line with the Zacks Consensus Estimate. In the trailing four quarters Gap has delivered three in-line earnings, while posting one beat. Further, a look at Gap's earnings estimates revisions shows that the Zacks Consensus Estimate for the fourth-quarter and fiscal 2016 has witnessed an uptrend, over the last 30 days. However, the current Zacks Consensus Estimate of 51 cents per share for the fiscal fourth quarter reflects a year-over-year decline of 10.4%. Nonetheless, analysts polled by Zacks expect revenues of $4.4 billion, up marginally by 0.2% from the year-ago quarter.

Further, Gap forms part of the Retail-Wholesale sector. Per the latest Earnings Trends , total earnings for the sector are expected to decline marginally by 1%, while revenue is projected to improve 4.8%.

Gap, Inc. (The) Price and EPS Surprise

Gap, Inc. (The) Price and EPS Surprise | Gap, Inc. (The) Quote

Factors Influencing this Quarter

Gap recently posted solid comparable store sales (comps) and sales numbers for the 2016 holiday season, comprising the months of November and December. While early November results were dampened by soft traffic at stores and malls, the company's sales numbers for December showed a marked improvement. Comps benefited from the company's solid strategies and favorable customer response for its namesake and Old Navy brands. Further, the robust holiday performance encouraged management to raise its fiscal 2016 earnings view, to slightly above its previously guided range.

Clearly, management's focus on its recently chalked-out strategic plan has been paying off. The plan advocates positioning the company to match the accelerated pace of change in the apparel industry. The company intends to escalate its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide. The company remains committed to better position itself for long-term growth by setting its priorities right and channelizing resources accordingly. However, macroeconomic headwinds like volatile consumer behavior remain a threat for the company. Also, stiff competition from other players can weigh upon Gap's performance, thus making us slightly cautious of the upcoming results.

Nonetheless, the growth drivers have helped Gap to outperform the Zacks categorized Retail - Apparel and Shoes industry in the past one year. Evidently, its shares have jumped 3.4% over the past one year, against the industry's decline of 9%.

Earnings Whispers

Our proven model does not conclusively show that Gap is likely to beat 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. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Gap is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 51 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Gap's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

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:

Papa John's International, Inc. PZZA , expected to release earnings on Feb 21, currently has an Earnings ESP of +4.55% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here ."

Costco Wholesale Corporation COST , scheduled to report earnings on Mar 2, currently has an Earnings ESP of +0.74% and a Zacks Rank #3.

Dollar Tree, Inc. DLTR , expected to release earnings on Mar 7, currently has an Earnings ESP of +0.75% and a Zacks Rank #2.

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Gap, Inc. (The) (GPS): 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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