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Urban Outfitters (URBN) Q4 Earnings: Stock to Disappoint?

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Urban Outfitters Inc.URBN is scheduled to release fourth-quarter fiscal 2017 results on Mar 7. In the preceding quarter, this Philadelphia, PA-based company reported earnings miss of 9.1%.

Notably, the company surpassed the Zacks Consensus Estimate in two of the four trailing quarters, with an average earnings beat of 4.4%. Let's see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors' minds now is, whether Urban Outfitters will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 56 cents, reflecting a year-over-year decrease of over 8%. We note that the Zacks Consensus Estimate have been witnessing downward revisions in the past 60 days. Analysts polled by Zacks expect revenues of $1,037 million, in comparison with $1,013 million reported in the prior-year quarter.

We note that the stock has underperformed the Zacks categorized Retail-Apparel/Shoe industry and the S&P 500 in the past six months. The company's shares have declined 29.4%, while the Zacks categorized industry has lost 12% in the last six months. Meanwhile, the S&P 500 has gained 7.9% during the same time frame.

Factors at Play

Urban Outfitters' exposure to the Canadian and European markets could hurt the bottom-line performance in the quarter to be reported due to foreign currency headwinds. Moreover, the company faces stiff competition in the retail segment from other department stores, discounters, home furnishing stores, specialty retailers and direct-to-consumer businesses on attributes such as merchandise assortment, price, quality, location and credit facility. Further, aggressive pricing by competitors, is likely to dent the company's top-line and bottom-line results.

Investors are also concerned by management's remark over gross margin, which is expected to decline more than previously anticipated. Despite reporting year-over-year increase in holiday sales, Urban Outfitters expects gross margin to be affected by higher demand for lower margin items and fall in store traffic. This in turn will result in lower store sales, which compelled management to increase promotional activity.

Nevertheless, Urban Outfitters remains committed toward improving comps, investing in direct-to-consumer business, enhancing productivity in existing channels as well as adding new brands and optimizing inventory level. The company intends to increase wholesale operations and augment eCommerce activities.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Urban Outfitters 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. Urban Outfitters has an Earnings ESP of -1.79% as the Most Accurate estimate stands at 55 cents, while the Zacks Consensus Estimate is pegged higher at 56 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Moreover, Urban Outfitters carries a Zacks Rank #5 (Strong 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.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise

Urban Outfitters, Inc. Price, Consensus and EPS Surprise | Urban Outfitters, Inc. Quote

Stocks Poised to Beat Earnings Estimates

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

Fred's, Inc. FRED has an Earnings ESP of +15.79% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Panera Bread Company PNRA has an Earnings ESP of +0.56% and a Zacks Rank #3.

Tailored Brands, Inc. TLRD has an Earnings ESP of +9.09% and a Zacks Rank #3.

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Urban Outfitters, Inc. (URBN): 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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