Gap Inc. stock (NYSE: GAP) is set to announce its fiscal first-quarter earnings on Thursday, May 29, 2025, with analysts forecasting earnings of 45 cents per share and $3.42 billion in revenue. This would indicate a 7% year-over-year rise in earnings and a 1% increase in sales compared to the previous year’s figures of 42 cents per share and $3.39 billion in revenue. Historically, GAP stock has risen 74% of the time after earnings announcements, with a median one-day gain of 7.6% and a maximum noted increase of 31%.
For the fiscal year 2025, Gap anticipates a sales growth of 1% to 2%, while expecting a more substantial operating income increase of around 8% to 10%, driven by strategic investments in brand development and enhancements to the supply chain. Investors are encouraged to monitor the company’s efforts to rejuvenate the Athleta brand, as well as its ongoing optimization of both digital and brick-and-mortar retail strategies. Gap’s emphasis on operational efficiency and flexibility in response to market conditions is expected to provide a strong base for overcoming possible economic difficulties. The company currently has a market capitalization of $11 billion. Revenue for the past twelve months was $15 billion, and it achieved operational profitability with $1.1 billion in operating profit and a net income of $844 million.
For traders who respond to events, historical trends may present a favorable position, whether by preparing in advance of earnings or reacting to movements after the release. However, if you are looking for upside with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and produced returns surpassing 91% since its launch.
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Historical Odds of Positive Post-Earnings Returns for Gap
Some insights on one-day (1D) post-earnings returns:
- There are 19 earnings data points documented over the past five years, with 14 positive and 5 negative one-day (1D) returns recorded. Overall, positive 1D returns occurred approximately 74% of the time.
- Interestingly, this percentage rises to 82% if we examine data from the last 3 years instead of 5.
- The median of the 14 positive returns = 7.6%, and the median of the 5 negative returns = -6.1%
Additional information regarding the observed 5-Day (5D) and 21-Day (21D) returns following earnings is outlined along with the statistics in the table below.
Correlation Among 1D, 5D, and 21D Historical Returns
A relatively less risky approach (although not beneficial if the correlation is weak) is to comprehend the correlation between short-term and medium-term returns after earnings, identify a pair that exhibits the highest correlation, and carry out the corresponding trade. For instance, if 1D and 5D reflect the highest correlation, a trader can set themselves “long” for the following 5 days if the 1D post-earnings return is favorable. Here is some correlation data based on a 5-year and 3-year (more recent) history. Note that the correlation 1D_5D pertains to the relationship between 1D post-earnings returns and ensuing 5D returns.
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