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Urban Outfitters (URBN) Q1 Earnings Preview: Let’s Take a Look


Urban Outfitters Inc. URBN is scheduled to release first-quarter fiscal 2018 results on May 16. In the preceding quarter, this Philadelphia, PA-based company reported earnings miss of 1.8%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Urban Outfitters will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 13 cents, reflecting a year-over-year decrease of nearly 36%. We note that the Zacks Consensus Estimate have been stable in the past 30 days. Analysts polled by Zacks expect revenues of $771 million, in comparison with $736 million reported in the prior-year quarter.

We note that the stock has underperformed the Zacks categorized Retail-Apparel/Shoe industry and the S&P 500 in the past three months. The company’s shares have declined 19.7%, while the Zacks categorized industry has lost 8.7%. Meanwhile, the S&P 500 has gained 2.2%.

Factors at Play

Urban Outfitters’ exposure to the Canadian and European markets could hurt the bottom-line performance in the quarter to be reported due to foreign currency headwinds. Moreover, the company faces stiff competition in the retail segment from other department stores, discounters, home furnishing stores, specialty retailers and direct-to-consumer businesses on attributes such as merchandise assortment, price, quality, location and credit facility. Further, aggressive pricing by competitors, is likely to dent the company’s top-line and bottom-line results.

Investors are also concerned by management’s remark over gross margin, which is expected to decline year over year in first-quarter fiscal 2018 on account of rise in delivery and logistic expenses. In fourth-quarter fiscal 2016, gross margin contracted 142 basis points (bps) to nearly 33%.

Nevertheless, we expect the company to drive growth on the back of new store openings, increase in direct penetration, growing wholesale operations, technology advancements and merchandising improvements. We also believe that better product execution and effective inventory management will help augment performance.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Urban Outfitters is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Urban Outfitters has an Earnings ESP of -18.75% as the Most Accurate estimate is at 13 cents, while the Zacks Consensus Estimate is pegged higher at 16 cents. The company carries a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Urban Outfitters, Inc. Price, Consensus and EPS Surprise

Urban Outfitters, Inc. Price, Consensus and EPS Surprise | Urban Outfitters, Inc. Quote

Stocks Poised to Beat Earnings Estimates

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

Best Buy Co., Inc. BBY has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. HD has an Earnings ESP of +0.62% and a Zacks Rank #2.

Lowe's Companies, Inc. LOW has an Earnings ESP of +0.94% and a Zacks Rank #3.

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