Market Overview

Guess? Earnings Preview: Double-Digit Revenue Growth Expected

Guess? (NYSE: GES) is scheduled to report second-quarter fiscal 2012 results later today, after the markets close. Investors will be watching to see whether expansion in Europe and Asia will again offset domestic weakness and provide another positive earnings surprise, as it did in the first quarter.

Analysts are looking for the apparel maker to report earnings of $0.81 per share, which is an increase over $0.72 in the same period of last year. That EPS estimate has crept up from $0.79 per share 90 days ago. And note that analysts have underestimated the company's per-share earnings in every quarter going back to 2008.

The analysts' forecast also calls for the company to post revenues of $656.4 million, which would be 13.7% higher than a year ago. Looking ahead to the current quarter, analysts so far are looking for sequential and year-over-year growth of both revenues and per-share earnings. And the forecast for the full year so far calls for revenues up 12.1% year over year and EPS 8.1% higher.

The Company

Los Angeles-based Guess? designs, markets and licenses lifestyle collections of apparel and accessories for men, women and children. Offerings include jeans, skirts, dresses and jackets, while licensed products include eyewear, watches, handbags and swimwear. It operates more than 400 stores in the U.S. and Canada, as well as more than 30 in Europe. The company also sells its products through wholesale, e-commerce and licensing distribution channels. The company was founded in 1981 and now has a market cap of $2.9 billion.

During the three months that ended in July, the company announced that founder and chairman Maurice Marciano would step down as an executive officer, and also announced that it had secured a new five-year $200 million revolving credit facility.

Performance

The company has a long-term earnings per share growth forecast of 13.9%, a return of equity of 25.6% and a dividend yield of 2.5%. Its 11.0 P/E ratio and 0.8 PEG ratio are less than the industry averages. The company keeps more than enough cash on hand to cover its long-term debts. Nine of 15 analysts rate the stock a Buy or Strong Buy, while none rate it a Sell.

Shares recently hit a 52-week low of $30.21 and the share price is now more than 32% lower than six months ago. The stock has underperformed competitors such as Polo Ralph Lauren (NYSE: RL) and True Religion Apparel (NASDAQ: TRLG), as well as the broader markets, year to date.

Action Items:

Bullish: Traders interested in exchange traded funds invested in Guess? might want to consider the following trades:

  • Rydex S&P Midcap 400 Pure Growth (NYSE: RFG): up more than 28% in the past year
  • SPDR S&P MidCap 400 (NYSE: MDY): up more than 15% in the past year
  • iShares S&P MidCap 400 Index (NYSE: IJH): up more than 15% in the past year

Bearish: Traders may want to consider these alternative positions:

  • ProShares UltraPro Short MidCap400 (NYSE: SMDD): up more than 46% in the past month
  • Direxion Daily Mid Cap Bear 3X Shares (NYSE: MWN): up more than 45% in the past month
  • ProShares Short MidCap400 (NYSE: MYY): up more than 17% in the past month

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: apparel stocks earnings previews ETFs Exchange Traded Funds Guess? inverse ETFs Polo Ralph Lauren Retail Stocks short ETFs True Religion ApparelEarnings Long Ideas Short Ideas Previews Trading Ideas ETFs

 

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