San Francisco-based Gap (GPS) reported its results for 4Q16 and fiscal 2016 on Thursday, February 23, 2017. The results relate to the three-month period ending January 28, 2017.
The company came in ahead of the Wall Street revenue estimates and reported in-line earnings. Its revenue increased 1.1% YoY (year-over-year) to $4.3 billion—$40 million higher than the consensus—while its EPS (earnings per share) fell 11% YoY (year-over-year) to $0.51.
For fiscal 2017, the company has guided diluted earnings per share to be in the $1.95–$2.05 range, implying a fall of 1% at the midpoint.
Gap is a global apparel retail company that sells apparel, accessories, and personal care products for men, women, children, and babies in more than 90 countries. The company is the owner of Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. It operates 3,200 company-owned stores, 450 franchise stores, and e-commerce sites.
Notably, the First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.95% of its holdings in Gap.
Valuations update and stock recommendation
Gap is currently trading at a one-year forward earnings multiple of 12.6x, operating in the middle of its 52-week PE (price-to-earnings) range of 9.7x–15.5x. The company is cheaper to Ralph Lauren (RL) and VF Corporation (VFC), which are trading at 16x and 17.4x, respectively. Hanesbrands (HBI) and Michael Kors (KORS) are, however, cheaper as they have been valued at 10.5x and 9.4x, respectively.
The average 12-month price target by the 30 analysts covering Gap is $25.27, indicating a 0% upside over the next 12 months.
What this series is about
This series will give you an earnings overview to Gap’s 4Q16 and fiscal 2016 results. Keep reading for key revenue drivers for the quarter, a look at Gap’s margins, and an investigation of Gap’s Wall Street analyst recommendations.