On Thursday, Wolverine World Wide (NYSE:) shares saw its price target increased to $14 from $10 by Telsey Advisory Group, while the firm maintained a Market Perform rating on the stock.
The adjustment follows Wolverine’s first-quarter earnings, which surpassed expectations, driven by higher revenue, gross margin expansion, and reduced operating expenses. This led to a $0.05 earnings per share (EPS) beat, with $0.01 attributed to a lower tax rate.
Wolverine World Wide reported robust Q1 results, with revenue exceeding prior forecasts. The company also managed to preserve its annual outlook one quarter into the fiscal year, despite a lower top line due to its Merrell and Saucony kids brands transitioning to a licensed model.
The early signs of success from Wolverine’s turnaround strategy were highlighted, including a record gross margin for the quarter, accelerated direct-to-consumer (DTC) sales, and positive wholesale order trends. The company’s financial health is also showing signs of improvement, with better inventory management and debt reduction efforts noted.
Additionally, the appointment of Taryn Miller as the new Chief Financial Officer is a strategic move by CEO Chris Hufnagel, who took the helm in August 2023, to strengthen the executive team amid the company’s ongoing transformation.
Despite these positive developments, Wolverine World Wide still faces challenges. There were significant declines in its major brands during the quarter, with the exception of Sweaty Betty.
Telsey Advisory Group pointed out that while there are areas requiring further improvement, the macroeconomic environment and exposure to the wholesale channel continue to pose risks.
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The new price target of $14 is based on an 11.0x multiple applied to the two-year forward EPS estimate of $1.27. This valuation is compared to the three-year next twelve months (NTM) average multiple of 9.8x and a recent multiple of 12.7x.
The increase in the price target reflects confidence in Wolverine’s business transformation progress, even as the firm retains its Market Perform rating on the stock.
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