Kontoor Brands (KTB) third-quarter earnings beat estimates

Kontoor Brands (KTB) came out with quarterly earnings of $1.11 per share, beating the Zacks Consensus Estimate of $0.99 per share. For comparison, a year earlier earnings per share were $1.28. These numbers have been adjusted for one-off items.

This quarterly report presented an earnings surprise of 12.12%. A quarter ago, it was expected that this maker of Wrangler and Lee apparel would post earnings of $1.04 per share when it actually produced earnings of $1.09, delivering a surprise of 4.81%.

The company has topped consensus EPS estimates four times over the last four quarters.

Kontoor, which belongs to the Zacks Textile – Apparel industry, posted revenues of $606.52 million for the quarter ended September 2022, missing the Zacks Consensus Estimate by 3.79%. For comparison, revenues from the previous year amounted to USD 652.3 million. Over the last four quarters, the company has topped consensus revenue estimates only once.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Kontoor’s shares have lost approximately 33.2% since the beginning of the year compared to the S&P 500’s decline of -21.1%.

What’s next for Kontoor?

Although Kontoor has underperformed the market this year, the question that arises for investors is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Before the results are published, the estimate revision trend for Kontoor is unfavorable. While the magnitude and direction of estimate revisions may change following the company’s just-released earnings report, the current status translates into the stock’s Zacks Rank #4 (Sell). Therefore, it can be expected that the company’s shares will underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $0.97 on $698.6 million in revenues for the coming quarter and $4.28 on $2.62 billion in revenues for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, the Textiles & Apparel industry is currently in the bottom 41% of the 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another company in the same industry, Ralph Lauren (RL), has not yet released results for the quarter ending September 2022. The results are expected to be released on November 10.

The high-end fashion company is expected to post quarterly earnings per share of $2.07 in its upcoming report, representing a -21% year-over-year change. The consensus EPS estimate for the quarter has not changed over the last 30 days.

Ralph Lauren revenue is expected to be $1.56 billion, up 3.7% from the same quarter last year.

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