Earnings Preview: Will Michael Kors Keep Rallying?

High-end retailer Michael Kors KORS will release its fiscal fourth-quarter earnings results before Wednesday's market open.

Since going public in December 2011, the stock has been on a tear, rising 300 percent. Year-to-date, shares are up almost 19 percent, easily outperforming the S&P 500.

Unlike its rival Coach COH, which has been hit by plunging same-store sales and tepid growth, Michael Kors has been hitting on all cylinders. In its fiscal third-quarter, the company recorded revenue growth of 59 percent and same-store sales growth of 28 percent.

Given its extremely impressive performance in recent quarters, however, it may take a huge beat to appreciably move the stock after the print. The stock trades at a large premium to the retail sector as a whole and any disappointment could trigger a sell-off.

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At current levels, the shares trade at a forward P/E of 25 and a PEG ratio of 1.22. The company's nearly $20 billion market-cap also dwarfs that of many retail competitors. This stock is priced for significant sales growth and Wall Street will be expecting Michael Kors to deliver once again.

Analyst Expectations

Heading into Wednesday's key report, analysts have consensus earnings per share estimates of $0.68. The high estimate is $0.78 and the low estimate is $0.65. In the year ago period, the company reported EPS of $0.50. Over the last 90 days, analysts' earnings estimates have held steady. During this time, the stock has fallen a little more than three percent.

Analysts have consensus sales estimates of $815.30 million, representing year-over-year sales growth of 36.50 percent. The high estimate on Wall Street is $891.67 million with a low estimate of $795.00 million. The fairly wide range could result in share price volatility after the print if revenue comes in either at the high or low end of expectations.

Analyst Color

Analysts at Morgan Stanley were extremely optimistic about Michael Kors Q4 prospects in a report dated May 12. They wrote that "KORS' persistently strong handbag growth and cross-category appeal supports our 'best growth story in retail' thesis."

The firm reiterated its Overweight rating and $105.00 price target on the stock.

Morgan Stanley analysts also believe that Coach's struggles are benefiting Kors. The analysts wrote that in light of a 21 percent decline in same-store sales at Coach in the most recent quarter, "we believe L-T share shift to KORS from COH continues." They also noted that "KORS remains the most Google searched handbag brand."

The Company

Michael Kors has become one of the world's leading high-end, luxury brands in a relatively short period of time. Based in Hong Kong, Michael Kors has a presence in over 85 countries with revenue channels in retail, wholesale and licensing.

The company employs around 6,400 people and as of 2013 operated 231 North American retail stores and 73 international retail stores. Its wholesale channel includes approximately 2,215 department and specialty stores in North America and 1,034 department and specialty stores internationally.