Earnings season can make or break portfolios, so it is crucial to be in the best stocks with growth on our side. Michael Kors (NYSE:CPRI) has been one of my favorite companies since it went public in December of 2011, and its performance has been incredibly impressive. I originally spotlighted the stock on February 8, and proceeded to reiterate its potential on March 19 and September 25. Let's take a look and see if the company is set to exceed expectations once again.

Affordable luxury
Michael Kors is home to one of the most fashionable lines of women's and men's apparel and accessories. It is known as the affordable luxury brand and it has become loved by both consumers and analysts alike. The most consumer attention has been placed on its watches and handbags, but it has been gaining ground in clothing, footwear, sunglasses, and headwear.  Few brands can say they tend to the taste of both women and men, but Michael Kors has found the recipe for success.

(Image courtesy of Cristen Koeppen)

First quarter blowout
On August 6, Michael Kors reported first quarter numbers for fiscal 2014. It was an absolute blowout quarter and sent the stock soaring. Here's an overview of the results:

Statistic Reported Expected
Earnings Per Share $0.61 $0.49
Revenue $640.90 million $570.77 million
Earnings per share rose a very impressive 79.4% and revenue grew 54.5% compared to the same quarter a year ago. Gross profit also grew to 62% from 60.5%. North America, the company's largest market, showed continued strength with same store sales growth of 25% and further expansion paired with brand awareness should keep this rolling. Overall, it was a very strong quarter for the company and this caused management to raise its outlook for the second quarter. 

November numbers
Second quarter results are due out on Nov. 5 and analysts expect large growth on both the top and bottom lines. These are the current consensus analyst estimates:

Statistic Expected 2012
Earnings Per Share  $0.67  $0.49
Revenue  $750.86 million  $532.9 million

These expectations would call for earnings growth of 36.7% and revenue growth of 40.9% year over year. These numbers are easily obtainable by a company with this much momentum going into the quarter. The one thing that worries me is that investors and analysts may expect a bigger beat than what actually occurs. What do I mean by this? Michael Kors has been exceeding expectations by such a large percentage over the last few quarters that a 25% beat may send the stock lower. Expectations have become so high that it could be a sweet report with a bitter reaction in the stock. With that said, I expect a large beat. 

And they stumble again...
Since the Michael Kors era began, Coach (NYSE:TPR) has seen tough times. I warned to stay away from Coach on Oct.19 and the earnings results on Oct. 22 proved this to be the best course of action. The report was full of negative statistics. Here is a year-over-year comparison:

  • Earnings per share were flat at $0.77
  • Total sales fell 1% to $1.15 billion
  • Operating income declined 3% to $322 million
  • Operating margin fell to 27.9% from 28.6%
  • Gross profit declined 2% to $827 million
  • Gross margin fell to 71.8% from 72.8%
  • North American same store sales fell 6.8%

This was a horrible report. The stock reacted accordingly by falling over 7.5% at the open of trading. Coach's fiscal 2014 outlook did not help the situation and the worst part of this is that same store sales in North America are expected to be in the high negative single digits for the year. Coach is very troubled. This is not the kind of company we want to invest our hard earned money in. Stay away from this one at the moment.

The Foolish bottom line
Michael Kors has been one of the best performing stocks in the market this year. It has dominated the luxury goods space. Its growth is unmatched in the industry. It has the potential to return a very high percentage over the next several years. It is set to report earnings in a few days, so keep a close eye on this one because it could provide a great investment opportunity either going into the report or after the release.