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Key Predictions for Earnings Reports of RL and GIL

Over halfway through the third-quarter earnings season, we note that so far the scenario has turned out to be pretty good. Further, rising momentum on the revenue front also remains noteworthy. Moreover, the above-average proportion of positive earnings surprises has been maintained in the quarter while the estimate revision trend for the next quarter remains favorable. The overall third-quarter earnings for the S&P 500 index remains on track to reach a new all-time quarterly record by beating the previous earnings season’s record.

Per the Earnings Preview dated Oct 27, nearly 272 S&P 500 members have already reported their results. Of these, approximately 75.7% delivered positive earnings surprises, while 66.2% beat top-line expectations. Notably, earnings for these companies have advanced 8.7% from the same period last year, with revenues up 6.7%.

For the third quarter as a whole, total earnings for the S&P 500 index are projected to rise 5.4% year over year on 5.5% growth in revenues.

A Look at Consumer Discretionary Sector

Textile – Apparel stocks, which are our focus today, form part of the Consumer Discretionary sector. Markedly, the performance of the index depends upon all 16 Zacks sectors, out of which nine sectors are expected to witness an earnings decline in the third quarter, including the Consumer Discretionary sector. While the sector’s earnings are expected to decline 1.1%, its revenues are likely to increase 2.8%.

Also, a Zacks Sector Rank of #9 (out of 16), places it at the bottom 44% of the Zacks classified sectors. So far this year, the sector has gained 9.8%, lower than the S&P 500’s growth of 15%.  

Well, our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Let’s see what awaits the couple of Textile – Apparel stocks that are slated to report their quarterly results on Nov 2.

What’s in Store for RL and GIL?

Ralph Lauren Corporation RL,the leading designer, marketer and distributor of premium lifestyle products, has a robust earnings surprise history. Further, the company’s progress on its Way Forward Plan and other restructuring initiatives is a positive. Going forward, management remains confident on Ralph Lauren’s performance based on its efforts related to global brand reorganization, constant infrastructural investments and e-commerce enhancements.

However, concerns regarding soft sales trend on account of weak demand, brand exits and efforts to drive quality of sales, pose serious threats. Revenues are expected to be $1.65 billion, down 9.2% from the year-ago quarter. (Read: Will Ralph Lauren Strategies Aid in Topping Q2 Earnings?)

Ralph Lauren Corporation Price, Consensus and EPS Surprise

Ralph Lauren Corporation Price, Consensus and EPS Surprise | Ralph Lauren Corporation Quote

Nevertheless, the positive earnings trend is likely to continue in second-quarter fiscal 2018 as well. Ralph Lauren has an Earnings ESP of +2.43% and a Zacks Rank #2, making us reasonably confident of an earnings beat.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Gildan Activewear Inc. GIL is a leading manufacturer and marketer of premium quality branded basic activewear. Notably, it has been benefiting from the acquisitions and solid sales witnessed at the company’s Branded Apparel and Printwear segments.

Consequently, the company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 5.5%.

Gildan Activewear, Inc. Price, Consensus and EPS Surprise

Gildan Activewear, Inc. Price, Consensus and EPS Surprise | Gildan Activewear, Inc. Quote

Further, our model shows that Gildan is likely to beat earnings estimates in third-quarter 2017. This is because it has an Earnings ESP of +0.52% and a Zacks Rank #2, which makes us reasonably confident of an earnings beat. Also, analysts polled by Zacks expect net sales of $749.3 million in, up 4.8% from the prior-year period.

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