adidas AG (ADR) (ADDYY) is slated to report third-quarter 2016 results on November 3. Last quarter, the company delivered a positive earnings surprise of 90.7%.
In fact, it has outperformed earnings by an average of 42.3% over the trailing four quarters.
Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Adidas posted solid results in the first half of the year, reflecting growth across several categories, networks and nations. The company has been particularly gaining from the Group, which delivered a splendid operating performance in the last quarter. In fact, management also raised its full-year 2016 outlook for the Group, backed by confidence in its strong prospects.
Further, the company’s constant product launches, along with its product and marketing initiatives bode well for the upcoming results. Also, we remain impressed with Reebok International’s 13-quarter-long growth story, as it reflects favorable worldwide response from consumers. These factors, along with expected benefits from the back-to-school selling season augur well for the upcoming release.
However, foreign currency headwinds and increasing labor costs continue to pose concerns, as these may dent the company’s gross margin, thus impacting overall results.
Also, management expects the second half of 2016 to be more difficult owing to tough year-over-year comparisons and unfavorable hedging rates.
Hence, we would like to wait and see if the company’s growth plans can help keep its positive streak alive.
Our proven model does not conclusively show that Adidas is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen.
This is not the case here, as you will see below:
Zacks ESP: Adidas currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.05 per share. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Adidas’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
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:
Avon Products, Inc. (AVP), slated to release earnings on Nov 3, has an Earnings ESP of +33.33% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
L Brands Inc (LB), expected to release earnings on Nov 16, has an Earnings ESP of +2.22% and a Zacks Rank #3.
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