Will Carter's (CRI) Q3 Earnings Post a Surprise this Season? - Analyst Blog

Apparel retailer, Carter's, Inc. (CRI), is slated to report its third-quarter 2014 results on Oct 23, before the opening bell. In the previous quarter, the company had posted a positive surprise of 28.8%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Carter's continues to progress with its growth initiatives well on track. It plans to continue undertaking product innovations, enhance its supply chain capacities, improve operating margin, manage expenses efficiently and focus on store expansion. However, firms remain cautious owing to the intense promotional headwinds in the retail environment.

Following its better-than-expected sales and earnings, achievement of its pricing strategies, enhanced margins and effective expense management, the company provided an upbeat guidance for this quarter. Management envisions sales to grow by 4–6 %, while adjusted earnings per share are expected to rise by 7–10% in this quarter.

Earnings Whispers?

Our proven model does not conclusively show that Carter's is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.24.

Zacks Rank: Carter's carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements:

The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #2 (Buy).

L Brands, Inc. (LB) has an Earnings ESP of +3.13% and a Zacks Rank #2.

Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +0.52% and a Zacks Rank #2.
 

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L BRANDS INC (LB): Free Stock Analysis Report
 
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