Guess? surges after beating expectations on revenue and profit

Investing.com -- Apparel maker Guess? Inc (NYSE: GES) jumped after beating expectations for revenue, though its third-quarter outlook was below consensus targets when it reported after the close on Wednesday.

The company reported adjusted earnings of 72 cents a share on revenue of $664.5 million. Analysts expected earnings per share of 40 cents on revenue of $640.5M. Revenue was up 3% from the same time last year.

CEO Carlos Alberini said: “We are very pleased with our second quarter performance, which exceeded our expectations for top-line growth and delivered a significant beat in operating earnings and earnings per share for the period. Our international businesses continued to perform strongly with robust revenue growth and our Americas Retail business achieved a sequential improvement in performance compared to the first quarter, as we drove better customer conversion in stores.”

It sees third-quarter adjusted earnings per share of 55 cents to 64 cents and revenue rising 2.5% to 4.5%. Analysts expected third-quarter earnings per share of 71 cents.

For the full year, the company sees adjusted earnings per share of $2.88 to $3.08 and revenue rising 2.5% to 4.0% versus prior guidance of 2-4%.

GES shares rose more than 18% in early Thursday trading.

Reacting to the report, UBS analyst Mauricio Serna told investors that while it was a good quarter, they are maintaining a Neutral rating and $22 price target on the stock.

"GEs delivered a beat and raise Q2 report. This reinforces our view the company is on the right path to stabilize operating margins while delivering LSD% sales growth," wrote Serna. "However, we believe a challenging retail environment will negatively impact GES’ Americas business and cause its 2H23 EPS growth to slow."

Assessing GES's nearer-term prospects, the analyst stated that the firm doubts the company's P/E will expand in a decelerating sales environment.

"We forecast a 5% 5-yr. EPS CAGR and believe this outlook is fairly priced. We thus continue to rate it Neutral," he concluded.

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