A Preview Of Gap's Earnings

On Thursday, May 27, Gap GPS will release its latest earnings report. Decipher the announcement with Benzinga's help.

What Are Earnings, Net Income, And Earnings Per Share?

Earnings and EPS are useful metrics of profitability. Total earnings also known as net income is equal to total revenue minus total expenses. Dividing net income by the total number of shares outstanding yields EPS.

Earnings And Revenue

Sell-side analysts are expecting Gap's loss per share to be near $0.05 on sales of $3.44 billion. Gap reported a per-share loss of $2.51 when it published results during the same quarter last year. Sales in that period totaled $2.11 billion.

Why Analyst Estimates And Earnings Surprises Are Important

Analysts who cover this company will publish forward-looking estimates of its revenue and EPS each quarter. Averaging together every EPS and revenue prediction that each analyst makes about a company in a quarter yields the "consensus estimates." A company posting earnings or revenue above or below the consensus estimate is known as an "earnings surprise" and may move the stock by a considerable margin.

If the company were to post earnings in line with the consensus estimate when it reports Thursday, EPS would be up 98.01%. Revenue would be up 63.27% from the year-ago period. Here is how the company's reported EPS has stacked up against analyst estimates in the past:

Stock Performance

Over the last 52-week period, shares are up 258.5%. Given that these returns are generally positive, long-term shareholders can relax going into this earnings release. Long-term shareholders are already enjoying 12-month gains prior to the announcement.

Do not be surprised to see the stock move on comments made during its conference call. Gap is scheduled to hold the call at 17:00:00 ET and can be accessed here.