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Will it be a Slick Ride for Carter's (CRI) in Q2 Earnings?

Carter's, Inc. CRI, marketer of branded apparel and related products, is slated to release second-quarter fiscal 2017 results on Jul 27. In the previous quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 16.9%. Notably, the company’s earnings surpassed our estimate by an average of 7.5% in three out of the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Carter's 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 71 cents, a penny down from the year-ago period. We note that the Zacks Consensus Estimate has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $682 million compared with $639.5 million reported in the year-ago quarter.

Factors Influencing this Quarter

Carter's had earlier informed that it expects second-quarter net sales to increase in the range of about 6–8% year over year on account of growth across all segments, which comprises of the contributions from Skip Hop. The company not only expects growth in retail business but also anticipates Skip Hop brand to be a major growth driver. Carter's targets sales worth $90 million from its Skip Hop brand this year and plans to double it by 2021. Moreover, its new business with Amazon and growth efforts in China bode well.

However, earnings for the second quarter are expected to be in the range of 65–70 cents, marginally down from 72 cents reported in the year-ago quarter. Rise in spending due to investment in new stores, upgrading e-commerce and retail technology might hurt margins in the short term.

Carter's, Inc. Price, Consensus and EPS Surprise


Carter's, Inc. Price, Consensus and EPS Surprise | Carter's, Inc. Quote

What the Zacks Model Unveils?

Our proven model does not conclusively show that Carter's is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Carter's has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 71 cents. The company’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Stocks with Favorable Combination

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

L Brands, Inc. LB has an Earnings ESP of +2.38% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation COST has an Earnings ESP of +0.50% and a Zacks Rank #3.

Nordstrom, Inc. JWN has an Earnings ESP of + 4.92% and a Zacks Rank #3.

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