Coach: Enough Earnings In That Purse? (COH)

Before the open of trading on Tuesday morning, we’ll get to see earnings out of Coach Inc. (NYSE: COH).  The purse and apparel maker is expected to post $0.50 EPS on $777.6 million in revenues. 

Unfortunately, this earnings report today marks the company’s year-end, so we may not get much as far as long-term guidance out for Fiscal June 2008.  Estimates for next quarter are $0.48 EPS on $786.5 million in revenues.  In case the company does give long-term guidance estimates are $2.37 EPS on $3.63 Billion in revenues (implied 15% EPS growth and 15% revenue growth).

Here are some metrics for today that you want to watch closely:

• Options traders appear to be braced for a move of nearly $2.00 in either direction.
• Analysts have average price targets of nearly $38.00 and the 52-week trading range is $23.22 to $50.95.
• With a $26.38 level, you can tell the chart has been an ugly one.  Asfar as recent and longer-term bands, it looks like the stock has acurrent near-term trading range of about $25.50 to $29.00.

The wild card for 2008 into 2009 is going to revolve around just howmuch of a slowdown has been priced in.  The stock has already been cutin half, but there have been no systematic revisions lower for thehighly discretionary spending company.  The company did so well for solong that expectations always stayed high before it too ran into issues.

If the company can convince Wall Street and Main Street that it isgoing to hold up to its plan, then the value investors are probablygoing to be screaming how there just haven’t been too many times thatthis strong brand company has been on sale for investors at about11-times forward numbers.  If those numbers come down very much thenyou just have a solid brand with a value under question.

Jon C. Ogg
July 28, 2008