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Michael Kors Holdings Ltd. (KORS) Earnings Should Pop – Again

 November 09, 2012 04:21 PM


(By Rich Bieglmeier) Michael Kors Holdings Ltd. (KORS) is expected to report earnings on Tuesday, November 13, 2012. Wall Street anticipates that KORS will earn $0.40 for its 2nd quarter. iStock expects the apparel company will report earnings that will exceed Wall Street's consensus number. The iEstimate is $0.47 – a 7 cents upside surprise.

KORS engages in the design, marketing, distribution, and retail of branded women's apparel and accessories, and men's apparel. On September 20th, the company upped guidance for earnings and sales for the current quarter, putting the upper-end at 40 cents.

Since going public, Michael Kors has reported earning three times, bypassing the street's consensus by 70%, 31.25%, and 111.11%, from the most recent. In the days surrounding the profit checkup, shares popped by 21.1%, 8.9%, and 23.1%, respectively.

[Related -3 Companies Trading At A Discount Despite Stellar Earnings]

KORS price recently fell through the bottom of a price box constructed from August through mid-November. Following the Q1's $10 price spike to $52.50, the stock bounced between $57.50 and $52.50.  Since the post-election fall, the stock moved out of the box, dropping to its current price.

If the apparel maker goes four-for-four as our iEstimate suggests, then we can see Michael making a move back towards its 52-week high of $58.62. If not, initial support can be found at $47.50 and then $42.50. Options traders are split on their bets for next Tuesday with open interest of 16,245 on the call side and 16,452 for put options using the 45, 50 and 55 strike prices.

[Related -Michael Kors Holdings Ltd. (KORS) Q1 Earnings Preview:]

Analysts, on the other hand, are more certain about KORS future as five analysts have upped their estimates for this quarter, and two raised the bar for 2013 within the last week. It's been our experience that upward guidance on the eve of earnings is normally a bullish sign. Investors should not be surprised if management ups guidance again as the holiday shopping season begins in less than two weeks.

Based on retail sales results for women's apparel in August, September and October, the trends are good for KORS and apparel in general. Additionally, clothing made its way into iStock's emerging bull list in our technical sector performance review.

Overall, the combination of an iEstimate that's 7 cents higher than the consensus, upwardly revised eps guidance from management, better than expected retail sales during KORS Q2, the Christmas quarter coming, and clothing moving into the bullish column, iStock believes the conditions are right for another bullish surprise and  reward for investors.

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