How Purple Innovation (PRPL) Looks Just Ahead of Q2 Earnings

Purple Innovation, Inc. PRPL is likely to register an increase in the top line when it reports second-quarter 2020 results. The Zacks Consensus Estimate for revenues is pegged at $176.6 million, indicating an improvement of 71.5% from the prior-year reported figure.

Further, the bottom line of this comfort innovation company known for creating the Purple Grid Mattress is expected to improve year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has been stable at 20 cents over the past 30 days. The figure suggests growth of 11.1% from the prior-year quarter.

Notably, this Lehi, UT-based based company’s bottom line has surpassed the Zacks Consensus Estimate in each of the trailing four quarters by a significant margin.

Factors to Note

Purple Innovation witnessed a robust start to the second quarter. In a recent business update on Jun 9, management highlighted that the company has been witnessing a sturdy demand for its products — mattresses, pillows and seat cushions — particularly in direct-to-consumer channel. Notably, owing to the recent shift from wholesale to direct-to-consumer channel, the company has been seeing margin improvement and higher cash generation. Cumulatively, these are likely to get reflected in the company’s second-quarter results.

Management further added that it has seen a revival in wholesale orders, courtesy of the reopening of more partner doors and improvement in traffic and order quantities. Impressively, Purple Innovation sources majority of its raw materials and components domestically, which reduces its vulnerability to global uncertainty arising due to the ongoing pandemic.

We note that direct-to-consumer orders soared 125% year over year to about $71 million during the month of May. This was due to growth in mattresses and bases, and ancillary products including pillows, sheets and seat cushions. This followed direct-to-consumer order increase of more than 170% to approximately $54 million during the month of April. Apparently, these are likely to get reflected in the company’s to-be-reported quarter’s top line.

Additionally, the company informed that wholesale orders during the month of May were $17.3 million, which reflects a decline of less than 2% from the year-ago period. We note that the rate of decline has decelerated sharply from 42.7% witnessed in the month of April. This can be attributed to the reopening of more wholesale doors and increase in weekly orders on a sequential basis. As of May 31, more than two thirds of the company's roughly 1,800 wholesale partner doors have reopened.

PURPLE INNOVATION, INC. Price, Consensus and EPS Surprise

PURPLE INNOVATION, INC. Price, Consensus and EPS Surprise

PURPLE INNOVATION, INC. price-consensus-eps-surprise-chart | PURPLE INNOVATION, INC. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Purple Innovation 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. But that’s not the case here.

Although Purple Innovation carries a Zacks Rank #2, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Home Depot, Inc. HD has an Earnings ESP of +28.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco COST has an Earnings ESP of +1.31% and a Zacks Rank #3.

Big Lots, Inc. BIG has an Earnings ESP of +1.66% 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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