Gap (GAP) Likely to Surpass Earnings Projections: Will the Shares Rise Further?

Gap's Upcoming Earnings: What to Expect

Gap (GAP) is projected to report lower earnings compared to the previous year, despite an anticipated increase in revenue for the quarter ending January 2026. While analyst consensus provides a general outlook, the actual results—especially how they compare to these forecasts—can significantly influence the stock’s short-term movement.

If Gap’s reported figures surpass expectations when results are announced on March 5, the stock could see an uptick. Conversely, disappointing numbers may lead to a decline in share price.

Although management’s commentary during the earnings call will shape the market’s reaction and future outlook, it’s useful to consider the likelihood of an earnings per share (EPS) surprise ahead of time.

Analyst Forecasts and Revenue Projections

Wall Street expects Gap to post quarterly earnings of $0.45 per share, representing a 16.7% decrease from the same period last year.

Revenue is forecasted to reach $4.2 billion, which would be a 1.3% increase year-over-year.

Trends in Analyst Estimate Revisions

Over the past month, the consensus EPS estimate for Gap has remained steady, indicating that analysts have not significantly altered their outlook during this period.

It’s important to note that individual analyst revisions may not always be reflected in the overall consensus change.

Understanding the Earnings ESP Model

Changes in analyst estimates prior to an earnings release can provide insight into the company’s performance for the quarter. The Zacks Earnings ESP (Expected Surprise Prediction) model is designed to capture this information.

This model compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. Since the Most Accurate Estimate is updated more recently, it may better reflect the latest information available to analysts.

A positive or negative Earnings ESP reading suggests the likelihood of actual earnings deviating from the consensus. However, the model is most effective when the ESP is positive.

When a stock has a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold), it has historically delivered a positive earnings surprise nearly 70% of the time. A strong Zacks Rank further enhances the predictive value of the Earnings ESP.

It’s worth noting that a negative ESP does not necessarily predict an earnings miss. The model is less reliable for stocks with negative ESP readings or lower Zacks Ranks (#4 or #5).

Gap’s Current Earnings Outlook

For Gap, the Most Accurate Estimate is higher than the consensus, resulting in an Earnings ESP of +3.14%. This suggests that analysts have recently become more optimistic about the company’s earnings potential.

Gap currently holds a Zacks Rank of #3 (Hold), which, combined with the positive ESP, points to a good chance of exceeding the consensus EPS estimate.

Does Past Performance Offer Clues?

Analysts often look at a company’s history of meeting or beating earnings estimates when forecasting future results. For the previous quarter, Gap was expected to earn $0.58 per share but reported $0.62, delivering a 6.9% surprise.

In fact, Gap has outperformed consensus EPS estimates in each of the last four quarters.

Key Takeaways

While beating or missing earnings estimates can impact a stock’s price, other factors may also play a role. Sometimes, stocks fall even after an earnings beat if other aspects disappoint investors, and vice versa.

Nevertheless, focusing on companies likely to exceed expectations can improve investment outcomes. Checking a company’s Earnings ESP and Zacks Rank before earnings releases can help identify promising opportunities. Gap appears well-positioned for an earnings beat, but investors should also consider other factors before making a decision to buy or avoid the stock ahead of its results.

Industry Comparison: American Eagle Outfitters

American Eagle Outfitters (AEO), another retailer in the same sector, is forecasted to report EPS of $0.71 for the quarter ending January 2026—a 31.5% increase from the prior year. Revenue is expected to reach $1.73 billion, up 7.9% year-over-year.

The consensus EPS estimate for American Eagle has been revised upward by 60% in the past month. However, the Most Accurate Estimate is lower, resulting in an Earnings ESP of -2.82%.

Despite a Zacks Rank of #1 (Strong Buy), the negative ESP makes it difficult to predict an earnings beat with confidence. Over the past four quarters, American Eagle has exceeded consensus EPS estimates three times.