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Gap’s 2Q17 Earnings: Strong Top and Bottom Lines

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Gap’s 2Q17 earnings

Gap (GPS) reported it 2Q17 results on August 17, 2017. The results pertain to the three-month period ending July 29, 2017.

In the first quarter, Gap beat Wall Street analysts’ revenue and earnings estimates. The company’s total revenue fell 1.3% YoY (year-over-year) to $3.8 billion. However, its top-line numbers were $30 million more than the consensus expectations.

The adjusted EPS (earnings per share) was $0.58 and beat the consensus expectation of $0.52. However, the adjusted EPS fell 3.3% compared to the same quarter last year.

Management also revised its EPS guidance to $2.02–$2.10 compared to $1.95–$2.05 guided earlier.

In this series, we’ll discuss Gap’s performance during the current quarter and its revised guidance.

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Valuations update

Currently, Gap is trading at a one-year forward PE (price-to-earnings) ratio of 11x. It’s operating closer to the lower end of its 52-week PE ratio range of 10.5x–15x. At these valuations, the company is cheaper than most of its apparel peers. In comparison, Ralph Lauren (RL), VF Corp (VFC), Hanesbrands (HBI), and PVH Corp (PVH) are trading at 16x, 20x, 11.7x, and 15.7x, respectively.

The average 12-month price target from 28 analysts covering Gap is $25.29, which indicates an 11% upside over the next 12 months.

Investors looking for exposure in Gap through ETFs can consider the First Trust Consumer Discretionary AlphaDEX Fund (FXD). FXD invests 1.1% of its holdings in Gap.

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