Earnings stock declines ever end In a january 24 article i suggested that michaelKors(Nyse:Kors)Would beat top and bottom line fiscal third quarter expectations.This was based on a handbag survey, overblown discounting concerns, and the company’s continued growth in europe and japan. Turns out I was right, as MichaelKors soundly beat analysts’ expectations, but trying to predict the stock’s reaction is always more difficult.Thankfully, if a company does well, its stock follows long term. With regard to MichaelKors, this favorable long term outcome is almost certain, and the chart below illustrates why. Rl pe ratio(Forward 1y)Data by ycharts As you can see, michael michael kors handbags sale australia kors trades at the cheapest multiple to next year’s earnings expectations between it, coach(Nyse:Coh), and Ralph Lauren(Nyse:Rl).Essentially, wall street doesn’t think that michael kors is deserving of a higher premium than its peers, or even an equal premium at that. Ralph lauren saw revenue growth of just 0.5% in its last quarter, and is expecting revenue growth of 2% for the coming year.Michael kors grew nearly 30% while its comparable sales soared 8.6%.Coach, which is deemed the most valuable of the group, saw international sales decline 1% and north american sales fall 20%.While michael kors’ operating income margin did fall 210 basis points, it hardly compares to the 620 basis point decline that coach reported. In other words, michael kors is clearly the better performing company, and given its valuation many investors are likely wondering why the stock keeps trading lower behind industry leading growth.The answer to that question was explained after michael kors’ fiscal second quarter report.Unlike most stocks that fall rapidly, michael kors’ earnings expectations have actually risen. Typically, when a stock falls, so do earnings expectations.However, in the 90 days prior to november 6, 2014, michael kors’ 2015 and 2016 fiscal year eps expectations both increased.With higher expectations, it becomes harder for michael kors to impress wall street, but thankfully, after a one year 25% stock loss, expectations are finally starting to decline.For the fiscal year ended march 2015, its eps expectations have been lowered from $4.18 to $4.17 over the last 90 days.For the year ended march 2016, the eps has lowered by two pennies to $4.82 over the same span. While expectations aren’t declining substantially, michael kors investors should still be pleased that the estimates aren’t still tracking higher.This signals that wall street is finally starting to readjust estimates to reflect a fallen stock price and a revised outlook.While it’s impossible to know when kors will reverse to trade higher, i do think that the reverse in estimates is a good indication that it will be soon.After all, michael kors is trading at a discount to two competitors that lack growth, whereas michael kors is a company that’s expected to grow revenue 20% next year.Hence, regardless of the stock price, kors is still a great long term investment opportunity.
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July 31st, 2015 admin