Investing.com -- Shares in Abercrombie&Fitch Company (NYSE:ANF) popped more than 3% Monday after Citi analysts opened a 30-day positive catalyst watch on the stock ahead of the company’s earnings report on Nov. 26.
The Wall Street firm predicts strong earnings per share (EPS) beat against consensus, driven by robust double-digit comparable sales (comp) momentum at both Abercrombie&Fitch (A&F) and Hollister brands.
Notably, Hollister comps are expected to outperform A&F for the first time in years, which could lead to significant upside for the second half of fiscal year 2024 and fiscal year 2025 consensus EPS.
“While the magnitude of A&F’s 3Q comp deceleration matters, we believe A&F brand momentum remains solid, driven by strong execution/on-trend product,” analysts led by Paul Lejuez said in a note.
They have maintained their third-quarter EPS estimate at $2.51, compared to the consensus of $2.36.
Moreover, adjustments were made to comp estimates, lowering A&F's from +15% to +12% against a consensus of +14%, while raising Hollister's from +12% to +15%, above the consensus of +10%.
Citi has also raised its fiscal year 2024 and 2025 EPS estimates from $10.64 and $12.08 to $10.73 and $12.34, respectively, based on stronger Hollister comps.
The bank’s price target of $190 was maintained.
For the fourth quarter, analysts expect Abercrombie to guide sales to mid-single digits (MSD), including a negative impact from the previous year's extra week, suggesting underlying comp growth of low double digits (LDD).
Gross margin (GM) is projected to be flat, with a modest EBIT margin deleverage, leading to an EPS guidance of approximately $3.30, slightly below the consensus of $3.40.
Beyond the guidance, analysts highlighted three other factors to watch, including A&F's expected comparable sales deceleration compared to the second quarter, continued strength in Hollister's performance, and the anticipated ramp-up of share repurchases.
This content was originally published on Investing.com
