What to know before next week’s publication

The market expects Abercrombie & Fitch (ANF) to report earnings for the quarter ended April 2024, which would indicate year-over-year earnings growth on higher revenues. This well-known consensus outlook is important when assessing a company’s earnings picture, but an important factor that can impact a company’s near-term share price is how actual results compare to estimates.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on May 29. On the other hand, if these key numbers are not met, the stock could fall.

While management’s discussion of business conditions during the earnings call will largely determine the durability of the immediate price change and future earnings expectations, it is worth having partial insight into the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The teen clothing retailer is expected to post quarterly earnings per share of $1.62 in its upcoming report, representing a year-over-year change of +315.4%.

Revenue is expected to be $948.75 million, up 13.5% from the same quarter last year.

Estimate the trend of change

The consensus EPS estimate for the quarter has been revised upwards by 0.74% over the last 30 days to the current level. This broadly reflects how analysts covering the data have collectively re-evaluated their initial estimates during this period.

Investors should note that the direction of each analyst’s estimate revisions will not always be reflected in the aggregate change.

Whisper about earnings

Revisions to estimates prior to a company’s earnings release provide an indication of business conditions in the period in which the earnings are expected to be released. Our proprietary surprise prediction model, the Zacks Earnings ESP, is based on this insight.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is a newer revision of the Zacks Consensus EPS estimate. The idea is that analysts reviewing their estimates just before an earnings release have the latest information that could potentially be more accurate than what they and other consensus participants had previously predicted.

Thus, a positive or negative ESP reading theoretically indicates the likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

Please note that a negative earnings ESP reading does not mean a loss of earnings. Our research shows that it is difficult to predict earnings growth with any degree of confidence for stocks with negative ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How have the numbers changed for Abercrombie?

For Abercrombie, the Most Accurate Estimate is above the Zacks Consensus Estimate, suggesting analysts have recently become optimistic about the company’s earnings prospects. This translated into an ESP of +4.48%.

On the other hand, the stock currently has a Zacks Rank of #2.

So this combination indicates that Abercrombie is likely to beat the consensus EPS estimate.

Does the history of surprising results have any clue?

When calculating estimates of a company’s future earnings, analysts often consider how well the company has been able to match previous estimates. So it’s worth taking a look at the surprise history to gauge its impact on the upcoming issue.

For the last reported quarter, Abercrombie was expected to post earnings of $2.81 per share when it actually produced earnings of $2.97, representing a surprise of +5.69%.

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

Bottom line

Improving or lacking earnings may not be the only basis for a stock’s value rising or falling. Many stocks lose value despite good earnings because of other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite losing profits.

That said, betting on stocks that are expected to exceed earnings expectations increases your chances of success. Therefore, it is worth checking the company’s Earnings Rank and Zacks Rank before their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

Abercrombie seems like a compelling candidate to beat earnings. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

Expected results of an industry player

American Eagle Outfitters (AEO), another stock in the Zacks Retail – Apparel & Footwear industry, is expected to post earnings per share of $0.27 for the quarter ended April 2024. These estimates indicate a year-over-year change of +58.8%. . Revenue for the quarter is expected to be $1.15 billion, up 6.1% from the same quarter last year.

There has been no change in consensus EPS estimates for American Eagle over the last 30 days. Nevertheless, the company currently has an Earnings ESP of 6.84%, which reflects a higher most accurate estimate.

Combined with the Zacks Rank #3 (Hold), the Earnings ESP indicates that American Eagle is most likely to beat the consensus EPS estimate. The company has topped consensus EPS estimates three times over the last four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Abercrombie & Fitch Company (ANF): Free Stock Analysis Report

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