Can Adidas (ADDYY) Spring a Surprise this Earnings Season?
Adidas AG ADDYY is scheduled to release fourth-quarter 2016 results on Mar 8. The big question facing investors is whether this sporting goods retailer will be able to deliver a positive earnings surprise in the quarter to be reported.
Last quarter, Adidas’ earnings were in line with the Zacks Consensus Estimate, while it outperformed the same in the preceding two quarters. Further, Adidas forms part of the Consumer Discretionary sector. Per the latest Earnings Trends, total earnings for the sector are expected to rise 10%, with revenues projected to grow 11.3%.
Factors Influencing this Quarter
Adidas has significantly outperformed the Zacks categorized Shoes & Related Apparel industry in the past one year. The company’s shares have soared 61.6% over the past year, compared to the industry’s decline of 4.3%.
The company continues to gain strength from solid performance at the Group, which delivered robust revenues in the last reported quarter. In fact, Group’s sturdy performance in the first nine months of 2016, caused management to retain its outlook for full-year 2016, even though it anticipates one-time expenses in the second half of 2016, associated with Group’s expansion.
Group’s revenues are envisioned to improve at a high-teens rate, backed by growth witnessed across all regions. Further, the company expects operating expense leverage. Considering both factors, management projected net income from continuing operations (excluding goodwill impairment) to grow in the range of 35–39% year over year. Additionally, the company’s constant product launches, along with its product and marketing initiatives bode well.
However, foreign currency headwinds remain a concern, which is expected to have an adverse impact on gross margin. Also, stiff competition from other industry players remains a threat. Thus, we would prefer to wait and see if Adidas can return to its positive surprise track this quarter.
Earnings Whispers
Our proven model does not conclusively show that Adidas is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Adidas is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 6 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Adidas’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Earnings Estimates
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:
Tailored Brands, Inc. TLRD, slated to release earnings on Mar 8, currently has an Earnings ESP of +9.09% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Constellation Brands, Inc. STZ, expected to report earnings on Apr 5, currently has an Earnings ESP of +2.94% and a Zacks Rank #3.
Conagra Brands, Inc. CAG, expected to release earnings on Apr 6, currently has an Earnings ESP of +4.44% and a Zacks Rank #2.
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ConAgra Foods Inc. (CAG): Free Stock Analysis Report
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