SunTrust Favors Michaels Over Williams-Sonoma, Kirklands Into Q1 Earnings

In a recent report, analysts at SunTrust shared a preview of first quarter results for home décor companies: Williams-Sonoma, Inc. WSM, Michaels Companies Inc MIK and Kirkland's, Inc. KIRK.

Taking into account both macro and company-specific (particularly inventory) worries, the experts acquired a more conservative posture regarding their first quarter comp and EPS estimates for Buy-rated Kirkland’s and Williams-Sonoma, even though they remain optimistic on their long-term potential. On the other hand, the firm continues to favor shares of Michaels, citing “its relative defensiveness and consistency, significant market share opportunity [in spite of its already dominant position], several top line and margin drivers [including social media traction, private labels and direct sourcing] and inexpensive valuation.”

Having said this, SunTrust rates all three stocks as Buy cases – with attractive valuation, having issued a $20 price target for Kirkland’s – down from $20, an unchanged $33 price target for Michaels, and a $60 price target for Williams Sonoma – down from $65.

For the fiscal first quarter, SunTrust analysts are modeling EPS of:

• $0.09 for Kirkland’s, down from a previous estimate of $0.12, and below the Street’s consensus of $0.10
• $0.35 for Michaels, in line with the Street
• $0.48 for Williams-Sonoma, down from a previous estimate of $0.50, which was in line with the Street

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.