How Polo Ralph Lauren Could Get Back On Track

| About: Polo Ralph (RL)

Polo Ralph Lauren Corp. (NYSE:RL) is set to report FQ3 2014 earnings before the market opens on Wednesday, February 5th. Polo Ralph Lauren designs, markets and sells clothing, fragrances and accessories. Ralph Lauren, the designer behind the company, also created the US Olympic Team's 2014 uniforms. This quarter analysts are expecting the company to grow by about 4% year-over-year in profit and approximately 9% yoy on revenue. The company's stock has been down sharply in 2014 but its quarterly earnings report could be an opportunity to get things moving in the right direction again. Here's how analysts are expecting RL to report on Wednesday.

The information below is derived from data submitted to the platform by a set of Buy Side and Independent analyst contributors.

(Click Here to see All Estimates for Polo Ralph Lauren)

The current Wall Street consensus expectation is for Polo Ralph Lauren to report $2.51 EPS and $2.014B revenue while the current consensus from Buy Side and Independent contributing analysts is $2.50 EPS and $2.018B revenue. This quarter the buy-side as represented by the community is expecting Polo Ralph Lauren to beat the Street's expectations on revenue by a small margin but come up slightly short on profit.

Over the previous six quarters the consensus from has been more accurate than Wall Street in forecasting Polo Ralph Lauren's profit and revenue 5 times and once respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a smaller differential compared to recent quarters.

The distribution of estimates published by analysts on the platform range from $2.43 to $2.53 EPS and $2.000B to $2.032B in revenues. This quarter we're seeing a smaller distribution of estimates compared to previous quarters.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrower distribution of estimates signals more agreement in the market, which could mean less volatility post earnings.

Throughout the quarter the EPS consensus from Wall Street fell from $2.77 to $2.51 while the Estimize consensus inched up from $2.49 to $2.50. Wall Street raised its revenue consensus from $2.011B to $2.014B while the consensus from the Estimize community consensus remained flat at $2.018B. Timeliness is correlated with accuracy and Wall Street and Estimize have similar expectations going into the report.

The analyst with the highest estimate confidence rating this quarter is MartyChargin who projects $2.53 EPS and $2.023B in revenue. In the Winter 2014 season MartyChargin is rated as the 39th best analyst and is ranked 81st overall among over 3,750 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case MartyChargin is making a bullish call expecting Polo Ralph Lauren to beat Wall Street's expectations on profit and revenue.

While analysts on are expected RL to miss on profit but beat the Street on revenue, a strong report on Wednesday could help get the company's sliding stock price back on track.

Disclosure: None.

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Tagged: , Textile - Apparel Clothing, Earnings
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