Susquehanna Upgrades Wolverine World Wide To Positive

Susquehanna’s Christopher Svezia believes the full-year guidance for Wolverine World Wide, Inc. WWW is mostly achievable, given that the worst of the margin and sales decline seems to be behind the company.

Svezia upgraded the rating on the company from Neutral to Positive, while raising the price target from $18 to $25.

Target Achievable

The analyst also believes that the Street is underestimating Wolverine World Wide’s two- to three-year margin recovery, with potential for improvement of as much as 300 bps.

Svezia mentioned, “While this may be early, product trends appear to be improving as evidenced by some enthusiasm we see around Sperry's Spring non-boat shoe business, among others.”

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The analyst believes management’s target of 12 percent operating margins appears reasonable and could drive EPS of $2.00–$2.15 by FY18, which represents an operating margin improvement of 230 bps.

Expectations For FY16

Management had guided to a sales decline of 4–8 percent for FY16 as well as EPS of $1.30–$1.40.

The analyst pointed out that 1Q had been better than expected, driven by Sperry, Merrell and robust gross margin.

Following positive checks in the United States, and given the currency risk expected from the U.K., Svezia expects Wolverine World Wide to be able to achieve the 2Q expectations.

“Similarly, 2H16 expectations also seem achievable given that compares aren’t difficult, inventory should improve in 3Q and on the product side, there are several new initiatives at Merrell and building pockets of demand at Sperry,” Svezia said.