On March 17, 2011, specialty retailer Guess? Inc. (GES) announced its financial results for the fourth-quarter and year-end 2010.
Street analysts had more than a week to ponder on the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Review
Guess reported earnings of $1.11 in its fourth quarter ended January 29, 2011, beating the Zacks Consensus Estimate of $1.06. Earnings were also up 19.4% from 93 cents reported in the year-ago quarter. For full-year 2011, earnings increased 19.2% to $3.11 per share compared to $2.61 per share a year ago.
Total revenue increased 18.0% year over year to create another record of $756.9 million, surpassing the Zacks Consensus Estimate of $724.0 million.
(Read our full coverage on this earnings report: Who Beats Estimates, Guess?)
Agreement of Estimate Revisions
The fourth-quarter 2010 outperformance has left the analyst community unmoved, over the past one week, with static estimate revisions for the first quarter of fiscal 2011. For the second quarter of fiscal 2011 none of the analysts moved their estimate upward or downward. However, for fiscal 2011, two analysts have revised their estimates in the upward direction with no downward movement in the last 7 days.
Magnitude of Estimate Revisions
As a result of no movement in estimates seen over the past one week, the Zacks Consensus Estimates, for the first quarter of fiscal 2011 has remained at 44 cents. For the second quarter of fiscal 2011 and fiscal 2012 as well, the estimates have remained stagnant at corresponding earnings of 80 cents and $3.43 per share.
Our Recommendation
Despite the recent economic conditions, global expansion continues to be the cornerstone of the company’s growth strategy. The company’s expansion in Europe and Asia has paid off, with these regions contributing nearly two thirds of the annual revenue growth.
During the year, the company opened 237 new stores across the world, which helped Guess? brand to gain strong momentum globally.
The company faces intense competition from other well-established players in the industry, such as Warnaco Inc. (WRC) which may dent its margins.
Currently, Guess maintains a Zacks #4 Rank, which translates into a short-term Sell rating. Moreover, we retain a long-term Neutral recommendation on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
GUESS INC (GES): Free Stock Analysis Report
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