Guess? Earnings Preview: Lower EPS, Higher Sales Expected

Guess?

is scheduled to report fiscal fourth-quarter results tomorrow, March 14, after the closing bell. Investors have seen the company's net income fall year over year by an average of 2.3% over the past five quarters. But revenue has now risen for three straight quarters. Investors will be looking for the revenue trend to continue, as well as for the company to shake off the earnings miss in the third quarter and continue offering positive surprises.

Analysts predict that Guess? will report that per-share earnings came to $1.05 for the quarter and that revenue totaled $778.8 million. In the same quarter of last year, the apparel maker and retailer posted $1.11 per share and $756.9 million in sales. That EPS estimate is a penny less than 60 days ago. And as mentioned above, Guess? fell short of consensus EPS estimates in the previous quarter, ending a streak of earnings beats that went back more than eight quarters. Looking back to the previous quarter, the company said its profit fell 4% to $66.3 million, or $0.71 a share. That missed analysts' expectations by two cents per share. Revenue rose 4.7% year over year to $642.8 million, which also fell short of estimates. Guess? pointed to global economic pressures, the diminishing disposable income of the consumers and an increase in its tax rate in its third-quarter report.

For the full year, the consensus forecast calls for earnings of $3.07 per share on revenue of $2.7 billion. That compares to $3.16 per share and $2.5 billion last year. This EPS estimate is unchanged over the past 60 days.

Los Angeles-based Guess? designs, markets, distributes and licenses a leading lifestyle collection of contemporary apparel and accessories for men, women and children. The company operates about 495 retail stores in the United States and Canada and around 232 retail stores in Europe, Asia and Latin America. Guess? was founded in 1981 and now has a market cap of $3.4 billion. Competitors include Buckle

, Gap

, Express

and Ralph Lauren

. All of these retailers reported per-share earnings that topped consensus estimates in their most recent quarterly reports. But unlike the others, Gap's net income was lower than in the same period a year ago.

During the three months that ended in January, Guess? announced along with third-quarter results that the board approved a quarterly cash dividend of $0.20 per share. More recently, the company announced the appointment of a senior vice president of marketing, as well as a “chief people officer.”

Guess? has a long-term earnings per share growth forecast of 11.8% and a return on equity of 22.8%. Sales increased 21.6% over the past five years. The P/E and PEG ratios are lower than the industry averages, and the operating margin is higher than the industry average. Short interest is 6.6% of the float. Six of the 15 analysts surveyed who follow the stock rate it at Buy or Strong Buy. Their mean price target on the shares is about 6% higher than the current share price.

Shares are trading more than 22% higher than at the beginning of the year, but the share price is still more than 16% lower than a year ago. The price has been higher than 50-day and 200-day moving averages since mid February, and the former is rising to meet the latter. Over the past six months, the stock has underperformed the competitors mentioned above, as well as the broader markets.