The Gap, Inc. GAP is expected to register top and bottom-line decline when it reports fourth-quarter fiscal 2024 results on March 6, after the closing bell. For revenues, the Zacks Consensus Estimate is pegged at $4.07 billion, indicating a 5.4% drop from the year-ago quarter’s figure.

The consensus estimate for the bottom line is pegged at 36 cents per share, indicating a 26.5% decline from the year-ago quarter’s figure. The consensus estimate for fourth-quarter fiscal earnings has been stable in the past 30 days. 

The San Francisco, CA-based company has been reporting steady earnings outcomes, as evident from its bottom and top-line surprise trends in the trailing four quarters. GAP has a trailing four-quarter earnings surprise of 101.2%, on average. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 28.6%.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Factors Likely to Impact Gap’s Q4 Results

Gap’s quarterly results are likely to reflect the adverse impacts of a volatile macroeconomic landscape, including inflationary pressures and other headwinds. Soft spending patterns on evolving consumer preferences and adverse foreign currency translations are likely to have been other deterrents. The company has been witnessing soft store sales for a while now. We anticipate store and franchise sales to decline 12.7% year over year.

In addition, tough comparisons and weather-related headwinds are likely to hurt results. These factors, coupled with any deleverage in operating and other expenses, are expected to hurt the company’s top and bottom-line results. We expect total revenues to decrease 3.1% year over year at Gap, 6% at Old Navy, 6.2% at Banana Republic and 6.5% at Athleta. 

On the flip side, Gap has been smoothly progressing on the reinvigoration of its brands. Management has been committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Gains from these actions are expected to have somewhat offered a cushion to the company’s performance.

On its last reported quarter’s earnings call, management had anticipated the gross margin to be similar year over year for the fourth quarter of fiscal 2024. This excludes roughly one percentage point of deleveraged ROD from soft sales in the quarter, owing to the absence of the 53rd week.

What the Zacks Model Unveils for GAP

Our proven model predicts an earnings beat for Gap this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Gap currently has an Earnings ESP of +11.55% and a Zacks Rank of 2.

Valuation Picture of GAP Stock

Gap stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.44 on a forward 12-month basis, lower than 18.32 of the industry. Also, it is trading lower than its median of 14.15.

The recent market movements show that Gap’s shares have lost 0.6% in the past six months against the industry's 3.3% growth.

Other Stocks With the Favorable Combination

Here are three more companies, which according to our model, have the right combination of elements to post an earnings beat this season:

Abercrombie & Fitch ANF currently has an Earnings ESP of +0.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here. 

The company is likely to register growth in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.6 billion, which indicates an increase of 7.6% from the figure reported in the prior-year quarter. 

The consensus estimate for ANF’s earnings per share is pegged at $3.49, indicating an increase of 17.5% from the year-ago quarter’s figure. The consensus mark for earnings has moved down 0.6% in the past seven days. ANF has delivered a trailing four-quarter earnings surprise of 14.8%, on average.

Ulta Beauty, Inc. ULTA has an Earnings ESP of +1.62% and a Zacks Rank of 2 at present. ULTA is likely to register a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.5 billion, which indicates a 2.6% drop from the figure reported in the year-ago quarter.

The consensus estimate for Ulta Beauty’s fourth-quarter earnings is pegged at $7.06 per share, indicating a 12.6% decline from the figure in the year-ago quarter. The consensus mark for earnings has moved down a penny in the past 30 days. ULTA has delivered an earnings beat of 6.2%, on average, in the trailing four quarters.

DICK'S Sporting Goods, Inc. DKS currently has an Earnings ESP of +0.98% and a Zacks Rank of 2. DKS is expected to report a decline in its top and bottom lines when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $3.75 billion, which indicates a 3.3% decrease from the figure in the year-ago quarter.

The consensus estimate for DICK'S fiscal fourth-quarter earnings is pegged at $3.47 per share, down 9.9% from the year-ago quarter. The consensus mark for earnings has moved up 0.6% in the past 30 days. DKS has delivered a trailing four-quarter earnings surprise of 11.4%, on average.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report

Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report

The Gap, Inc. (GAP) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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