These 4 Stocks Are Running Into Earnings

Photo Credit: Maxime FORT

Walk down the streets of Manhattan and you’ll likely find a growing number of men and women draped in athletic clothing regardless of their intent to exercise. Athleisure is the new trend sweeping major metropolitan areas which combines fashionability with comfort. Given health and fitness have exploded in recent years it not surprising that both men and women are favoring their sneakers over dress shoes and high heels. As a result, Lululemon has burst on to the scene as the preeminent athleisure provider while traditional names like Nike, Under Armour and even the Gap are shifting their offerings to reach this new market. The growing popularity of athleisure has also reached corporate America as the aforementioned companies continue to deliver strong results in those sectors.

Lululemon Athletica (LULU) Consumer Discretionary – Textiles, Apparel & Luxury Goods

Former Lululemon CEO and founder, Chip Wilson, was in the news recently after making comments that Lululemon’s was not reaching it full potential. While it might turn out he is correct, the company’s recent earnings report would say otherwise. In its first quarter report, Lululemon beat expectations on both the top and bottom line, posting a 17% increase in sales from a year earlier. Since then the stock is up 5%, adding to its 36.6% gains from the start of the year. The quarter highlighted improvements in key areas such as comparable store sales, direct to consumer revenue and gross profit. Topping it all off, management also raised guidance for the full 2016, expecting revenue to be in the range of $2.30 and $2.35 billion with comparable store sales in the mid single digits. The second quarter is already seeing upward revisions after guidance was raised. The Estimize consensus is calling for earnings per share 40 cents on $514.69 million in revenue, reflecting a 16% increase on the bottom line and 13% on the top. The stock, as we have seen, typically does well during earnings season, increasing 2% between 5 days and 30 days following a report.

Nike (NKE) Consumer Discretionary – Textiles, Apparel & Luxury Goods

Nike triumphed this week when its premier NBA sponsor, Lebron James, took down Under Armour’s Stephen Curry in the NBA Finals. This battle on the court did not necessarily translate to the stock market as both Nike and Under Armour were up the Monday after Game 7. Needless to say, the Cavaliers victory should be a surefire way to get Lebron shoes off the shelf. Nike Basketball is only one piece of its business. Nike is also a leader in running gear and yoga inspired apparel amongst many other markets. The company continues to see staggering growth despite its size and brand recognition. With the NBA finals behind us, the Euros and Copa America underway and the Olympics in the near future, Nike should see an influx of sales in the coming months. The Estimize community is optimistic that Nike will deliver strong results given the major sporting events this season. The consensus data is calling for earnings per share of 51 cents on revenue of $8.30 billion in revenue, slightly higher than the Wall Street consensus. Regardless of earnings the stock has struggled this year, dropping 15% year to date.

Under Armour (UA) Consumer Discretionary – Textiles, Apparel & Luxury Goods

With 4 sports failures under its belt, some are not questioning whether Under Armour is cursed. The Warriors loss and Stephen Curry’s subpar performance, just the latest of the company’s misfortunes, fortunately had no bearing on the stock. In fact, shares of the company were up despite Nike’s NBA triumph late Sunday night. However, one day doesn’t make up for a year of mostly poor performance. The company has been scrutinized lately for failing to gain ground on Nike in the fight for athletic gear supremacy. Nike is still leaps and bounds ahead of Under Armour, but the latter has transformed itself into a serious contender in the past few years. Major athletes like Stephen Curry, Tom Brady and Jordan Spieth fall under the Under Armour brand and recently the company began offering products with Dwayne “The Rock” Johnson. The recent criticism of the new Curry Two Low shoes aren’t expected to hurt sales but could possibly improve brand recognition. The Estimize community is seeing through the star power and is calling for a deceleration in growth. The consensus data is looking for 4 cents on $1 billion in revenue, a 6% increase on the bottom line and 28% on the top. Per share estimates have dropped since Under Armour’s last quarter, reflecting analyst’s negative sentiment.

Gap (GPS) Consumer Discretionary – Speciality Retail

Weak consumer spending for apparel and accessories has been a consistent trend that has impacting certain retailers, the Gap included. Prior to its Q1 report, management warned that earnings would significantly miss expectations and by no surprise, they did. Earnings of 32 cents per share fell short of the Estimize consensus data by 12 cents, recording a drop of 41% from a year earlier. Weaker traffic and higher levels of inventory put pressure on the bottom line. This marked the fifth consecutive quarter that both earnings and revenue declined. The Gap’s core brands have all struggled in this time period, with Banana Republic stores faring the worst. Competitive pressures and the emergence of fast fashion have also played a role in Gap’s dwindling growth. Europe is currently a small portion of the Gap’s net sales, constituting only 5% of total revenues. Brexit sends the Euro and pound even further and Asian countries feel compelled to devalue its currency then Gap could see problems in 30% of its revenue. The Estimize community is already predicting another weak quarter. The consensus is calling for earning per share of 46 cents on $3.69 billion in revenue. Profits are expected to contract 25% on a year over year basis with revenue down 4% over the same time frame. Per share estimates have been cut 22% sinces its last report, reflecting analysts negative sentiment towards the company.