Pivotal Downgrades Columbia Sportswear Ahead Of Q2 Report

Apparel and footwear company Columbia Sportswear Co COLM is scheduled to report its second-quarter results after Thursday's close and investors should no longer be buyers ahead of the print, according to Pivotal.

The Analyst

Pivotal Research Group's Mitch Kummetz downgraded Columbia Sportswear from Buy to Hold, with a price target lifted from $95 to $96.

The Thesis

Columbia Sportswear is likely to report upside to estimates in its second-quarter results, but a bullish stance on the stock can no longer be justified for multiple reasons, Kummetz said in a note. These include:

• Based on the math behind management's guidance, sales are expected to be up around 10 percent in the quarter. This is short of management's low-double-digit guidance and the Street's 12 percent sales growth estimate.
• The company's big sales beat in the first quarter was due to a "fairly conservative" guidance, but the second quarter guide is stronger.
• Foreign exchange is likely to be less of a tailwind in the second quarter compared to the first quarter.
• Incremental sales from warm weather in the second quarter is likely less beneficial than gains from cold weather in the first quarter.

On the valuation front, Columbia Sportswear's stock is now trading at an FTM P/E multiple of 26 times and relative P/E multiple of 1.19 times, the analyst said. Both of these figures are "well above normal levels" so the stock's risk-reward profile is no longer favorable enough to warrant a bullish stance.

Price Action

Shares of Columbia Sportswear were trading around $92.65 Wednesday.

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