Guess Stock To Trade Higher Post Q4 Results?

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Guess?

Guess stock (NYSE: GES), a retailer that designs, markets, distributes, and licenses apparel and accessories for men, women, and children, is scheduled to report its fiscal fourth-quarter results on Wednesday, March 16. We expect GES stock to likely trade higher post fiscal Q4 results with revenues and earnings beating estimates. The increased consumer retail activity and cost-cutting initiatives are looking good for the retailer’s margins. In fact, the retailer has been able to handle the supply chain headwinds while working to get its business back on a growth track by improving brand awareness, product quality, and marketing. That said, the company will likely double its operating margin (at 11%) and profit from pre-pandemic levels by the end of this year – largely driven by the rapid growth of its profitable wholesale business. However, the company’s stock has been trading lower recently on concerns over the rising prices of cotton and higher overall manufacturing costs in Asian nations like Vietnam and China.

Our forecast indicates that the company’s valuation is around $21 a share, which is around 21% higher than the current market price. Look at our interactive dashboard analysis on Guess’ Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to likely beat consensus estimates

Trefis estimates GES’ FQ4 revenues to be around $822 million, marginally higher than the market expectations of $808 million. In Q3, the company’s revenue grew 13% year-over-year (y-o-y) and was up 4% compared to the pre-pandemic levels. These results were driven by European Wholesale, Americas Retail and Licensing businesses, which posted strong top and bottom-line results across the board. Looking ahead, the fourth quarter revenues are expected to be down mid-single digits y-o-y due to the impact of permanent store closures and an unfavorable shift of European wholesale shipments from the fourth quarter into the first quarter of next year, partially offset by continued momentum in the company’s global e-commerce business. For the current full-year, we expect Guess’ Revenues to decline 3% y-o-y to $2.6 billion.

Guess has given up its pursuit of younger teenage consumers and has moved toward consumers in their 20’s and early 30’s. The company has taken off in Europe, and that has to do with lifestyle and also excellent marketing.

2) EPS likely to be above consensus estimates

GES’ FQ4 earnings per share (EPS) is expected to be $1.20 per Trefis analysis, 5% ahead of the consensus estimate of $1.14. In Q3, the retailer managed to increase its adjusted operating margin to 10.9% from only 3.7% two years before, largely due to higher selling prices. On the bottom line, the company earned $0.62 per share in Q3, up from $0.58 in fiscal 2020 and $0.22 in 2019.

(3) Stock price estimate higher than the current market price

Going by our Guess’ Valuation, with adjusted earnings per share (EPS) estimate of around $2.98 and a P/E multiple of almost 7.2 in fiscal 2021, this translates into a price of $21, which is around 21% higher than the current market price.

It is helpful to see how its peers stack up. GES Peers shows how Guess’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GES Return -21% -27% 44%
 S&P 500 Return -5% -13% 85%
 Trefis MS Portfolio Return -6% -15% 233%

[1] Month-to-date and year-to-date as of 3/15/2022
[2] Cumulative total returns since the end of 2016

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