Abercrombie & Fitch shares to trade higher after Q3?

Abercrombie & Fitch (NYSE: ANF), a specialty retailer selling casual clothing and footwear, is expected to release its third quarter tax results on Tuesday, November 23. beat expectations. Inventories of consumer discretionary goods recovered well in the first half of fiscal 2021 thanks to rising vaccination rates in the United States. The pandemic has accelerated the shift in e-commerce for ANF, which was more profitable for the company. Our forecast indicates that ANF’s valuation is around $ 48 per share, or around 6% more than the current market price. Check out our interactive dashboard analysis at ANF’s pre-earnings: What to expect in the third trimester? for more details.

(1) Revenue expected in line with consensus estimates

Trefis estimates ANF’s third-quarter revenue to be around $ 898 million, in line with the consensus estimate of $ 897 million. The company’s revenue grew 24% year-over-year (year-on-year) to $ 865 million in the second quarter, thanks to an easy comparison with last year and also thanks to a good start to the school year in the United States, a strong response to the Gilly Hicks brand relaunch and updated store experiences. That said, the company’s revenue was 3% above pre-pandemic levels compared to the second quarter of 2019. The core US market saw healthy net sales growth of 11% over two years.

2) EPS should be slightly higher than consensus estimates

ANF’s earnings per share (EPS) for the third quarter is expected to be $ 0.69 per Trefis analysis, slightly above the consensus estimate of $ 0.66. ANF’s gross margin was 65.2% in the second quarter, up 590 basis points from the second quarter of 2019, benefiting from a double-digit improvement in the average unit retail (AUR). This, combined with continued expense management, led to an operating margin increase of 1,800 basis points on a two-year basis. As a result, the company’s adjusted earnings per share stood at $ 1.70, down from $ 0.23 in the second quarter of 2020, and a loss of $ 0.48 in the quarter before the pandemic. It should be noted that the current quarter benefited from approximately $ 0.53 related to certain non-recurring tax items.

(3) Estimate of the share price higher than the current market price

Through our Abercrombie & Fitch review, with an estimated earnings per share (EPS) of around $ 4.56 and a P / E multiple of 10.5x for fiscal 2021, that translates to a price of $ 48, or nearly 6% higher than the current market price.

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