Why Abercrombie (ANF) Might be Well Poised for a Surge

Abercrombie & Fitch (ANF) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this teen clothing retailer, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Abercrombie, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.64 per share for the current quarter, which represents a year-over-year change of -15.79%.

The Zacks Consensus Estimate for Abercrombie has increased 8.15% over the last 30 days, as four estimates have gone higher while two have gone lower.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $4.40 per share, representing a year-over-year change of +702.74%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, six estimates have moved up for Abercrombie versus no negative revisions. This has pushed the consensus estimate 26.39% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Abercrombie currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Abercrombie because of its solid estimate revisions, as evident from the stock's 11.6% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.

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Abercrombie & Fitch Company (ANF): Free Stock Analysis Report

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