Coach Inc. (COH), the designer and marketer of fine accessories and gifts, is scheduled to report its third-quarter 2011 financial results on April 26, 2011. The current Zacks Consensus Estimate for the quarter is 60 cents a share. For the quarter, revenue is $948 million, according to the Zacks Consensus Estimate.
Second-Quarter 2011, A Synopsis
Coach, the maker of handbags, wallets, shoes and other accessories, posted better-than-expected second-quarter 2011 results on January 25, 2010, on the back of healthy sales in North America and China.
The quarterly earnings of $1.00 per share beat the Zacks Consensus Estimate of 97 cents, and surged 33.3% from 75 cents delivered in the prior-year quarter buoyed by strong top-line growth.
The New York based company, Coach, said that total net sales for the quarter came in at $1,264.5 million, up 18.7% from the year-ago quarter, and breezed past the Zacks Consensus Revenue Estimate of $1,202 million.
The rise in sales was a positive indication for the luxury-goods market, battered by the recent economic downturn.
Third-Quarter 2011 Zacks Consensus
Analysts considered by Zacks, expect Coach to post third-quarter 2011 earnings of 60 cents a share. The current Zacks Consensus Estimate reflects a growth of 20% from the prior-year quarter earnings. The current Zacks Consensus Estimate for the quarter ranges between 56 cents and 63 cents a share.
Zacks Agreement & Magnitude
Of the 20 analysts following the stock, 6 analysts have revised their estimates downwards in the last 30 days, and one analyst lowered the estimate in the last 7 days. This led to a drop in the Zacks Consensus Estimate for third-quarter 2011. The Estimate moved down by a penny to 60 cents.
Positive Earnings Surprise History
With respect to earnings surprises, Coach has topped the Zacks Consensus Estimate over the last four quarters in the range of 3.1% to 14.6%. The average remained at 10.2%.
This suggests that Coach has beaten the Zacks Consensus Estimate by an average of 10.2% in the trailing four quarters. Given the past performance we expect the company to outperform the Zacks Consensus Estimate.
Coach in Neutral Lane
Coach’s sustained focus on store sales productivity, merchandising, marketing and strategic pricing has helped it remain afloat in a difficult consumer environment as well as drive comparable-store sales and operating margins gain.
Management also remains confident of sustaining a double-digit growth momentum in both top and bottom lines, after posting better-than-expected second-quarter 2011 results on the back of healthy sales in North America and China. The company’s long-term growth drivers include expanding of its global distribution model and accessing under-penetrated markets.
Moreover, a healthy balance sheet with a significant cash balance and a negligible debt load, positions it to drive future growth. We remain concerned about Coach’s operations in Japan, which were recently hit by the earthquake and tsunami.
The recent catastrophe in Japan may dent its performance to some extent. Japan contributes approximately 20% to total net sales. About 20 stores were closed following the devastation.
Currently, we have a long-term Neutral rating on the stock. However, Coach, which competes with Polo Ralph Lauren Corporation (RL), has a Zacks #4 Rank, which translates into a short-term Sell rating.