Kohl's (KSS) Up 7.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Kohl's (KSS). Shares have added about 7.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kohl's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Kohl's Q3 Earnings Miss , View Slashed

Kohl's Corporation reported dismal third-quarter fiscal 2019 results, as both top and bottom lines fell short of the Zacks Consensus Estimate. In fact, revenues marked its third consecutive miss. Further, management lowered its earnings guidance for the fiscal.

Q3 in Detail

Kohl’s adjusted earnings of 74 cents per share missed the Zacks Consensus Estimate of 85 cents. Additionally, the bottom line declined 24.5% on a year-over-year basis. The downside can be accountable to soft revenues, reduced gross margin and increased SG&A expenses.

Total revenues came in at $4,625 million compared with $4,628 million in the prior-year period. Moreover, the figure came below the Zacks Consensus Estimate of $4,668 million. Net sales dipped 0.3% to $4,358 million, while other revenues grew 3.1% to $267 million in the quarter.

Further, comps rose 0.4% compared with 2.9% growth in the year-ago quarter. Nonetheless, the company reverted to growth in this quarter after posting comps decline in the preceding two quarters. Comps in the third quarter were buoyed by a solid back-to-school season. In fact, management is encouraged about holiday season opportunities and is on track to accelerate growth-oriented investments.

However, gross margin plummeted 70 basis points (bps) to 36.3% in the reported quarter. SG&A expenses, as a percentage of revenues, expanded 100 bps to 30.7%. Further, operating income came in at $204 million, down 20.9% from the prior-year quarter’s figure.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $490 million, long-term debt of $1,856 million and shareholders’ equity of $5,355 million. The company generated net cash from operating activities of $1,045 million during the first nine months of fiscal 2019.

On Nov 13, Kohl’s announced a quarterly cash dividend of 67 cents per share, which is payable on Dec 24 to stockholders of record as of Dec 11.

Guidance

Kohl’s lowered its bottom-line view for fiscal 2019. It now envisions adjusted earnings per share of $4.75-$4.95, down from the previous guidance of $5.15-$5.45.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -10.87% due to these changes.

VGM Scores

At this time, Kohl's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kohl's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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