Gap Q3 Earnings Coming Up: Here's What Investors Should Know

The Gap, Inc. GAP is expected to register top-line growth when it reports third-quarter fiscal 2024 results on Nov. 21, after the closing bell. For revenues, the Zacks Consensus Estimate is pegged at $3.80 billion, indicating a 0.9% rise from the year-ago quarter’s reported figure.The consensus estimate for the bottom line is pegged at 56 cents per share, indicating a 5.1% drop from the year-ago quarter’s reported figure. The consensus estimate for fiscal third-quarter earnings has moved down a penny in the past seven days. GAP has a trailing four-quarter earnings surprise of 142.8%, on average. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 38.5%.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Factors Likely to Impact Gap’s Q3 ResultsGap’s fiscal third-quarter results are expected to reflect its ability to gain market share and revive its brand’s position. For Banana Republic, management is focused on re-establishing the brand in the premium lifestyle space by fixing fundamentals, assortment architecture, pricing and operational efficiencies. Old Navy’s emphasis on value-driven fashion and Athleta’s strong position in the thriving activewear market are likely to have driven sales. 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 bolstered the company’s top-line performance.On its last reported quarter’s earnings call, management expected net sales to rise slightly year over year from $3.77 billion based on the year-to-date trends. The company expects the gross margin to expand in the range of 50-75 basis points from 41.3% in the year-earlier quarter on lower promotional activity. GAP’s gross margin has been benefiting from lower commodity costs, improved promotions and cost-cutting actions. Management had earlier said that the third quarter is likely to benefit by nearly 1 percentage point owing to the shifts in timing. Our model anticipates a sales rise of 0.6% year over year and gross margin expansion of 50 basis points for the third quarter.However, uncertain macro and consumer environments are expected to have taken a toll on Gap’s performance. Higher operating expenses are likely to have hurt the company's profitability. Management, in its last earnings call, had projected operating expenses of nearly $1.3 billion. Our model predicts year-over-year adjusted operating expense growth of 0.8% for the fiscal third quarter.The Gap, Inc. Price and EPS Surprise  The Gap, Inc. price-eps-surprise | The Gap, Inc. QuoteWhat the Zacks Model Unveils for GAPOur 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’ ae reported with our Earnings ESP Filter.Gap currently has an Earnings ESP of +3.05% and a Zacks Rank of 2.Valuation Picture of GAP StockGap stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 10.81 on a forward 12-month basis, lower than 16.20 of the industry. Also, it is trading lower than its median of 15.18.The recent market movements show that Gap’s shares have gained 2.9% in the past six months against the industry's 2.4% decline.Other Stocks With the Favorable CombinationHere are three other companies, which according to our model, also have the right combination of elements to post an earnings beat this season:Abercrombie & Fitch ANF currently has an Earnings ESP of +4.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here. ANF is likely to register bottom and top-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.18 billion, indicating a 11.7% increase from the figure reported in the year-ago quarter. The consensus estimate for ANF’s earnings is pegged at $2.32 per share, implying 26.8% growth from the year-ago quarter’s actual. ANF has a trailing four-quarter earnings surprise of 28%, on average.lululemon athletica LULU presently has an Earnings ESP of +15.20% and a Zacks Rank of 3. LULU is likely to register bottom and top-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.35 billion, indicating 6.8% growth from the figure reported in the year-ago quarter.The consensus estimate for LULU’s earnings is pegged at $2.73 a share, implying a 7.9% increase from the year-earlier quarter. LULU has a trailing four-quarter earnings surprise of 7.9%, on average.American Eagle Outfitters AEO currently has an Earnings ESP of +0.15% and a Zacks Rank of 3. AEO is likely to register top-line growth when it reports third-quarter fiscal 2024 results. The consensus mark for revenues is pegged at $1.31 billion, indicating a rise of 0.4% from the figure reported in the prior-year quarter.The Zacks Consensus Estimate for quarterly earnings per share is pegged at 46 cents, down 6.1% from the prior-year quarter. AEO has a trailing four-quarter earnings surprise of 12%, on average.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report The Gap, Inc. 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