Guess (GES) Shares Up Over 10% After Posting Narrower-Than-Expected Loss

Guess?, Inc. (NYSE: GES) shares were up over 13% in the pre-market, after the company announced its first quarter fiscal 2018 financial results yesterday. GES reported a narrower-than-expected net loss per share, and beat on its revenue estimates, which may have been one of the reasons for the stock’s significant rise. Let’s take a look at the company’s financial results for the first quarter ended on April 29, 2017, some key statistics, and reasons why some traders may be bullish, while some may be bearish.

GES 1Q 2018 Financial Results

Guess reported a net loss of 24 cents per share, while the Thomson Reuters consensus estimate was a net loss of 32 cents per share. Additionally, the company reported revenue of $459M, while analysts were expecting revenue of $449M. The company’s GAAP net loss of $21.3M was over a 15% improvement year over year. Additionally, its GAAP diluted loss per share improved by over 10% year over year. However, on an adjusted basis, the company’s net loss fell slightly year over year. Additionally, its adjusted diluted loss per share fell by over 4% from the same period in the prior fiscal year.

Guess was able to grow its total net revenue by 2.2%, and in constant currency, it grew its net revenue by 4%, year over year. Despite its Americas Retail revenues falling by nearly 15%, its Europe revenues grew by over 20% and Asia revenues grew by nearly 17%.

Guess? Inc also provided guidance for the second quarter of the 2018 fiscal year, as well as expectations for the full fiscal year. The company expects its consolidated net revenues to grow between 2% and 4% year over year, in 2Q 2018. Additionally, it expected its adjusted earnings per share (EPS) to come in a range between 8 cents and 11 cents. For the 2018 fiscal year, GES is expecting to grow its consolidated net revenue by 3.5% to 5% year over year. Moreover, the company expects its adjusted EPS to come in between 34 cents and 44 cents for the 2018 fiscal year.

What You Need to Know About GES

  • GES shares were up over 13% during the pre-market, after the company reported its 1Q 2018 financial results.
  • The stock has been down nearly 20% over the past three months, and over 15% year to date, as of May 24, 2017.
  • GES had a trailing 12-month (TTM) price-to-earnings ratio of 37.0, while the apparel stores industry average was 17.9.
  • Guess had a price-to-book ratio of 0.9, while the industry average was 5.1.
  • The stock had a trailing 12-month price-to-sales of 0.4, compared to the apparel stores industry average of 1.0.

Check out GES on the daily chart below:

GES

Source: TradingView

If you look at the chart above, Guess has been in a downtrend, and looks to be forming a falling wedge, which was an indication that the stock could potentially reverse.

Bull Case

Guess Inc shares have been in a slump, and some traders may believe the stock could catch a bounce. GES traded below $10 recently, a level it hasn’t seen since 2009. However, the stock is forming a falling wedge, which could be an indication that a reversal may be in the cards. Additionally, the stock beat on its revenue and earnings estimates, and expects the company to grow at a modest pace during the 2018 fiscal year. Moreover, some of the stock’s ratios could be an indication it may be overvalued, in relation to its industry.

Bear Case

On the other hand, some traders may be thinking this is a dead cat bounce, and the stock could continue in its down trend and fall back below the $10 level. Additionally, the company was unable to grow its adjusted earnings per share for the quarter, which may be an indication of weak growth. Moreover, GES is set to gap up, and some traders may be looking for the stock to fill the gap.

Final Thoughts

Guess shares are up over 13% ahead of the bell, after reporting a narrower-than-expected net loss per share, and beating its revenue estimates. Although the company is trading higher in the pre-market, there are still arguments for why traders may be bullish, and why some may be bearish on GES.

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