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Abercrombie & Fitch Co. (ANF) Q4 Earnings Preview: Wild Ads & Wild Rides

 February 15, 2013 12:06 PM

(By Rich Bieglmeier) Abercrombie & Fitch Co. (ANF) will be holding its quarterly earnings conference call for all interested parties on February 22, 2013, at 8:30 a.m. ET.  The earnings press release is scheduled to cross the wire shortly after 7:00 a.m. ET. Wall Street anticipates that ANF will earn $1.95 for the fourth quarter. iStock expects the Apparel Stores company to report earnings that will beat Wall Street's consensus number. The iEstimate is $2.14, a $0.19 upside surprise. That's a courageous call.

Abercrombie & Fitch operates as a specialty retailer of casual apparel for men, women, and kids. The company sells various products, including casual sportswear apparel comprising knit and woven shirts, graphic t-shirts, fleece, jeans and woven pants, shorts, sweaters, and outerwear; personal care products; and accessories for men, women, and kids under the Abercrombie & Fitch, abercrombie kids, and Hollister brands.

[Related -Abercrombie & Fitch Co. (ANF) Q3 Earnings Preview: A Cold November Rain?]

Earnings announcements have really moved shares ANF in the days surrounding quarterly checkups, especially of late. In the last six announcements, the stock moved in order from most recent back by 39%, 13.2%, -21.6%, 7.6%, -18.2, and -19.3%.  Investors that can hang on for eight seconds to that bucking bull have a chance for a perfect score.

In the last 16 quarters, ten times Abercrombie shares gained an average of 9.96% when turning in their profit scorecard. That means the other six weren't quite so happy, losing an average of 12.67% - ouch, that hurts mommy.

[Related -Abercrombie & Fitch Co (ANF): Lack Of Visibility May Keep Investors On Sidelines]

For the most part, being on the right side of the surprise has predicted the stock price's direction. Eleven of the last 16 announcements delivered bullish surprises, with eight generating (72% of bullish beats) green days. Twice, ANF hit Wall Street's consensus on the nose and split the pair of reports with a gain and a loss. That leaves three bearish misses with two of the three hitting the wallet.

It was widely reported that ANF was one of the big Black-Friday winners – seems soooo long ago, doesn't it? Unfortunately, Abercrombie doesn't update same-store-sales between earnings announcements.

So… iStock examined a few keywords on Google Trends to look for hints to see how Q4 2012 stacks up against Q4 2011 and Q3 2012. "Abercrombie fitch" was Googled 27.9% more in 2012 than 2011, and flat compared to the third quarter. And, we didn't see anything worrisome with "Abercrombie return" during the holiday shopping season. Maybe, 2012 was a little lighter on returns than 2011, but not much daylight between the two years.

Options traders aren't laying down many clues either; although, open interest is the largest for March $57.50 calls. Either those speculators expect big things, or sold the option to collect the premium, which is the most likely scenario in our opinion.

Analysts are high on the sector in general. The consensus appears to be that lower input costs i.e. cotton, increased prices at the store, fewer deals, and inventory control should help margins improve industry-wide.  In the last 30-days, six analysts increased their outlooks for the current quarter with two coming in the past week. Usually, revising high on the eve of the announcement is a bullish sign.

Overall, Abercrombie & Fitch Co. (ANF) trends appear to be pointing to a handsome earnings surprise. However, ANF's wild reaction to the quarterly checkup makes trading Friday's announcement appropriate for hyper-aggressive investors only.



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