Abercrombie & Fitch (NYSE: ANF), a specialty retailer selling casual clothing and footwear, is scheduled to report its fiscal third-quarter results on Tuesday, November 23. We expect ANF stock to likely trade higher due to revenues coming in line and earnings beating expectations. The consumer discretionary stocks have been recovering well in the fiscal first half 0f 2021 on the back of increased vaccination rates in the U.S. The pandemic accelerated the e-commerce shift for ANF, which was more cost-efficient for the company. Our forecast indicates that ANF’s valuation is around $48 a share, which is around 6% higher than the current market price. Look at our interactive dashboard analysis on ANF’s Pre-Earnings: What To Expect in Q3? for more details.

(1) Revenues expected to be in line with consensus estimates

Trefis estimates ANF’s Q3 revenues to be around $898 Mil, in line with the $897 Mil consensus estimate. The company’s revenues grew a strong 24% year-over-year (y-o-y) to $865 million in Q2, driven by an easy comparison to last year and also aided by a strong start to the U.S. back-to-school season, solid response to the Gilly Hicks brand relaunch, and updated store experiences. That said, the company’s revenue was 3% above pre-pandemic levels from Q2 2019. The core U.S. market had healthy net sales growth of 11% on a two-year basis.

2) EPS likely to be slightly above consensus estimates

ANF’s Q3 earnings per share (EPS) is expected to be $0.69 per Trefis analysis, marginally above the consensus estimate of $0.66. ANF’s gross margin came in at 65.2% in Q2, up 590 basis points from the second quarter of 2019 – benefiting from double-digit AUR (average unit retail) improvement. This, combined with ongoing expense management, led to an expansion of operating margin by a whopping 1800 basis points on a two-year basis. Consequently, the company’s adjusted earnings per share came in at $1.70 compared to $0.23 in Q2 2020, and a loss of $0.48 in the pre-pandemic quarter. It should be noted that the current quarter benefited from about $0.53 related to some one-time tax items.

(3) Stock price estimate higher than the current market price

Going by our Abercrombie & Fitch’s Valuation, with an earnings per share (EPS) estimate of around $4.56 and a P/E multiple of 10.5x in fiscal 2021, this translates into a price of $48, which is almost 6% higher than the current market price.

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