Will Michael Kors Continue To Eat Coach's Lunch?

| About: Michael Kors (KORS)
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Michael Kors Holdings Ltd. (NYSE:KORS) is set to report FQ3 2014 earnings before the market opens on Tuesday, February 4th. Michael Kors is a New York-based fashion designer of women's sportswear. Over the past 6 quarters KORS has done well, beating Wall Street expectations in each period and continuing to take market share away from competitor Coach (COH).

Two weeks ago Coach reported its quarterly earnings and disappointed investors by missing expectations which were lower than last year's numbers to begin with. Coach's weak report gives 2 conflicting clues to investors. On one hand, this could be a positive indicator for KORS if it's a sign that they're continuing to eat Coach's lunch. Alternatively, retail sales from the holiday season have been shaky and Coach's low sales could be more than an isolated incident. Here's what the buy side and independent analysts are expecting KORS to report Tuesday.

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

(Click Here to see All Estimates for KORS)

The current Wall Street consensus expectation is for KORS to report 86c EPS and $859.98M revenue, while the current Estimize.com consensus from 38 Buy Side and Independent contributing analysts is 89c EPS and $871.14M revenue. This quarter the buy-side as represented by the Estimize.com community is expecting KORS to beat the Street on both profit and revenue.

Over the previous 6 quarters the Estimize.com consensus has been more accurate than Wall Street on KORS in predicting both EPS and revenue. 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 small differential compared to recent quarters.image

The distribution of estimates published by analysts on the Estimize.com platform range from 77c to 97c EPS and $814.00M to $836.22M in revenues. This quarter we're seeing a larger 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 wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.image

Throughout the quarter the EPS estimate from Wall Street remained relatively flat at 86c while the Estimize consensus fell from 92c to 89c. Wall Street raised its revenue forecast from $844.24M to $859.98M while Estimize expectations dropped from $878.33M to $871.14M. Timeliness is correlated with accuracy and although Estimize expectations fell as information about other companies' holiday sales were released, we saw a surge in Estimize revenue expectations going into the report which is often a bullish indicator.image

The analyst with the highest estimate confidence rating this quarter is WallStreetBean who projects 89c EPS and $865.12M in revenue. In the Winter 2014 season WallStreetBean rated as the 20th best analyst and is ranked 9th overall among over 3,650 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 WallStreetBean agrees with the Estimize community that KORS will beat Wall Street's expectations on both revenue and profit.

Analysts on Estimize.com are expecting Michael Kors Holdings Ltd. to have another great report on Tuesday. When KORS releases its quarterly earnings investors will see how well the company can perform in a challenging holiday sales environment and if KORS will continue on its path of rapid growth at Coach's expense.