Canaccord Expects Tapestry To Deliver Double-Digit EBIT Growth

Tapestry Inc TPR is scheduled to report second-quarter earnings Feb. 6. 

The Analyst

Canaccord Genuity's Camilo Lyon reiterated a Buy rating on Tapestry with a $58 price target.  

The Thesis

Lyon is optimistic ahead of the earnings report and said he expects the company to return to double-digit EBIT growth. Canaccord forecasts an EPS of 90 cents, higher than the 89-cent consensus, and Lyon said he expects sales growth of approximately 35 percent. "We are estimating a 12-percent year-over-year decline in Kate sales as TPR has begun enacting its full-price strategy reset by pulling back on Kate flash sales," the analyst said. 

Tapestry's gross margin is expected to improve sequentially through the fourth-quarter before expanding in the first quarter of 2019, Lyon said. 

U.S. tax legislation will add 25 cents or 8 percent to the company's fiscal 2019 EPS, said Lyon. Tapestry had around $1.3 billion of cash outside of the U.S. at the end of the first quarter, he said. Canaccord expects Tapestry to use the cash to invest in its brands, acquisitions and to boost dividends.

The Price Action

Tapestry was down 2.15 percent at $44.97 at the close Monday. It has gained almost 40 percent since the beginning of 2016.

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