What's In The Cards For Iconix (ICON) This Earnings Season?

Iconix Brand Group, Inc. (NASDAQ:ICON) is slated to report first-quarter 2017 results on May 10, before the market opens. The question lingering in investors’ minds is, whether this owner, licensor and marketer of a portfolio of consumer brands will be able to maintain its positive earnings surprise streak in the to-be-reported quarter. The company’s earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters by an average of 80%.

Let’s delve deeper how things are shaping up for this announcement.

What Does the Zacks Model Unveil?

Our proven model does not show that Iconix is likely to beat estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Iconix has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at 23 cents. Although the company’s Zacks Rank #3 increases the predictive power of ESP, but ESP of 0.00% makes surprise prediction difficult.

Which Way are Estimates Treading?

Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate for the first quarter and 2017 has been stable over the last 30 days. However, the current Zacks Consensus Estimate of 23 cents and 87 cents for the first quarter and 2017 are down from the earnings of 53 cents and $1.37 delivered in the year-ago periods, respectively.

Moreover, analysts polled by Zacks expect revenues of $88 million for the said quarter, down 7% from the year-ago quarter. Also, revenues for 2017 are projected to decline 4.6% to $351.7 million.

Factors Influencing the Quarter

Iconix has been divesting brands to manage its portfolio and spending resources on businesses that generate significant volume through both direct-to-retail (DTR) relationships and global networks. Further, the company is expanding its DTR licensing agreements as well as undertaking strategic partnerships and joint ventures. These agreements are expected to offset some of the challenges anticipated in 2017. For 2017, management expects its international business to grow similar to its global power brands and continue the expansion of the core brands.

However, it has been witnessing sluggishness in the women's and men's segments in the eight straight quarters now. Iconix expects headwinds like higher expenses and transition costs to hamper its profitability. Additionally, the company has been facing serious legal issues, which has dampened investors’ confidence. A challenging retail environment and competitive pressure also remain concerns.

We note that shares of Iconix have plunged over 26% year to date, underperforming the Zacks categorized Shoes and Retail Apparel industry’s gain of 5.3%. The industry is currently placed at bottom 25% of the Zacks Classified industries (192 out of 256).

Furthermore, Iconix forms part of the Consumer Discretionary sector that is currently placed at bottom 44% of the Zacks Classified sectors (9 out of 16). However, the earnings growth for the sector looks impressive, per the latest Earnings Preview. While earnings are estimated to improve 11.2%, revenues are projected to rise 11.4% in the first quarter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Deckers Outdoor Corporation (NYSE:DECK) has an Earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lululemon Athletica Inc. (NASDAQ:LULU) has an Earnings ESP of +7.14% and a Zacks Rank #3.

Gildan Activewear Inc. (TO:GIL) has an Earnings ESP of +2.08% and a Zacks Rank #3.

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