Coach Inc. (COH) is set to report earnings before the market opens on Wednesday, January 22. This holiday season we saw a larger than expected drop in brick and mortar retail sales, and a surge in online shopping through companies like Amazon (AMZN). Especially noteworthy was Best Buy (BBY), who saw its stock price tumble 30% last week due to poor retail sales. Coach is currently under pressure from the challenging retail sales environment and by fierce competition from Michael Kors (KOR). Over the past year profit and revenue from Kors have skyrocketed while analysts are expecting Coach to report about a 10% year over year shrinkage Wednesday morning.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Coach to report $1.11 EPS and $1.502B revenue while the current Estimize.com consensus from 24 Buy Side and Independent contributing analysts is $1.12 EPS and $1.487B revenue. This quarter the Estimize.com communtiy is expecting Coach to beat the Wall Street consensus on profit, but report less revenue.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small difference between the 2 groups’ forecasts.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The distribution of estimates published by analysts on Estimize range from $1.09 to $1.16 EPS and $1.410B to $1.520B in revenues. This quarter we’re seeing a large distribution of estimates compared to previous quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. In this case the large range of estimates is signaling that analysts disagree about how well Coach will perform this quarter. Disagreement between analysts may mean that the expected earnings can not be accurately priced in to the stock before the report, so we could see a lot of volatility in the stock price after the earnings release.
This quarter we saw significant downward analyst estimate revisions on Coach. The Wall Street profit consensus declined from $1.26 to $1.11 while the profit forecast from Estimize.com slipped from $1.13 to $1.12. The Wall Street revenue consensus dropped from $1.558B to $1.502B. The Estimize revenue consensus plunged from$1.510B to $1.487B at the end of the report. Timeliness is correlated with accuracy, a rapid decline in the community consensus going into the report is often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is j_holliman who projects $1.11 EPS and $1.505B in revenue. In the Winter 2014 season, j_holliman is currently ranked as the 108th best analyst and is ranked 7th overall among over 3,450 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case the highest rated analyst is expecting Coach to report in line with Wall Street on profit, but exceed by a small margin on revenue.
While the Estimize community expects Coach to edge past the Wall Street EPS consensus on Wednesday, it’s important not to overlook the broader trends here. Retail sales at physical stores are way down, and over the past couple of years Michael Kors has been eating Coach’s lunch.
Get access to estimates for Coach published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.