The Gap, Inc. GAP is expected to register top-line growth when it reports third-quarter fiscal 2024 results on Nov. 21, after the closing bell. For revenues, the Zacks Consensus Estimate is pegged at $3.80 billion, indicating a 0.9% rise from the year-ago quarter’s reported figure.
The consensus estimate for the bottom line is pegged at 56 cents per share, indicating a 5.1% drop from the year-ago quarter’s reported figure. The consensus estimate for fiscal third-quarter earnings has moved down a penny in the past seven days.
GAP has a trailing four-quarter earnings surprise of 142.8%, on average. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 38.5%.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Factors Likely to Impact Gap’s Q3 Results
Gap’s fiscal third-quarter results are expected to reflect its ability to gain market share and revive its brand’s position. For Banana Republic, management is focused on re-establishing the brand in the premium lifestyle space by fixing fundamentals, assortment architecture, pricing and operational efficiencies. Old Navy’s emphasis on value-driven fashion and Athleta’s strong position in the thriving activewear market are likely to have driven sales.
Management has been committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Gains from these actions are expected to have bolstered the company’s top-line performance.
On its last reported quarter’searnings call management expected net sales to rise slightly year over year from $3.77 billion based on the year-to-date trends. The company expects the gross margin to expand in the range of 50-75 basis points from 41.3% in the year-earlier quarter on lower promotional activity. GAP’s gross margin has been benefiting from lower commodity costs, improved promotions and cost-cutting actions.
Management had earlier said that the third quarter is likely to benefit by nearly 1 percentage point owing to the shifts in timing. Our model anticipates a sales rise of 0.6% year over year and gross margin expansion of 50 basis points for the third quarter.
However, uncertain macro and consumer environments are expected to have taken a toll on Gap’s performance. Higher operating expenses are likely to have hurt the company's profitability. Management, in its lastearnings call had projected operating expenses of nearly $1.3 billion. Our model predicts year-over-year adjusted operating expense growth of 0.8% for the fiscal third quarter.
The Gap, Inc. Price and EPS Surprise
The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote
What the Zacks Model Unveils for GAP
Our proven model predicts an earnings beat for Gap this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they’ ae reported with our Earnings ESP Filter.
Gap currently has an Earnings ESP of +3.05% and a Zacks Rank of 2.
Valuation Picture of GAP Stock
Gap stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.81 on a forward 12-month basis, lower than 16.20 of the industry. Also, it is trading lower than its median of 15.18.
The recent market movements show that Gap’s shares have gained 2.9% in the past six months against the industry's 2.4% decline.
Other Stocks With the Favorable Combination
Here are three other companies, which according to our model, also have the right combination of elements to post an earnings beat this season:
Abercrombie & Fitch ANF currently has an Earnings ESP of +4.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
ANF is likely to register bottom and top-line growth when it reports third-quarter fiscal 2024 results.
The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.18 billion, indicating a 11.7% increase from the figure reported in the year-ago quarter. The consensus estimate for ANF’s earnings is pegged at $2.32 per share, implying 26.8% growth from the year-ago quarter’s actual. ANF has a trailing four-quarter earnings surprise of 28%, on average.
lululemon athletica LULU presently has an Earnings ESP of +15.20% and a Zacks Rank of 3. LULU is likely to register bottom and top-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.35 billion, indicating 6.8% growth from the figure reported in the year-ago quarter.
The consensus estimate for LULU’s earnings is pegged at $2.73 a share, implying a 7.9% increase from the year-earlier quarter. LULU has a trailing four-quarter earnings surprise of 7.9%, on average.
American Eagle Outfitters AEO currently has an Earnings ESP of +0.15% and a Zacks Rank of 3. AEO is likely to register top-line growth when it reports third-quarter fiscal 2024 results. The consensus mark for revenues is pegged at $1.31 billion, indicating a rise of 0.4% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for quarterly earnings per share is pegged at 46 cents, down 6.1% from the prior-year quarter. AEO has a trailing four-quarter earnings surprise of 12%, on average.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
See Stocks Now >>Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
The Gap, Inc. (GAP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
