Abercrombie & Fitch (ANF) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
Analysts' growing optimism on the earnings prospects of this teen clothing retailer is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Abercrombie, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $0.06 per share for the current quarter represents a change of +120% from the number reported a year ago.
Over the last 30 days, three estimates have moved higher for Abercrombie while one has gone lower. As a result, the Zacks Consensus Estimate has increased 300%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $1.76 per share represents a change of +604% from the year-ago number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Abercrombie. Over the past month, four estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 22.96%.
Favorable Zacks Rank
The promising estimate revisions have helped Abercrombie earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
While strong estimate revisions for Abercrombie have attracted decent investments and pushed the stock 27.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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