Sell-Side Roundup: Yeti Exceeds Expectations In First Quarterly Print Since IPO

In its first earnings report since its October initial public offering, outdoor lifestyle company Yeti Holdings Inc. YETI exceeded profit expectations.

The Analysts

• Raymond James analyst Dan Wewer maintained an Outperform rating on Yeti with a $19 price target.
• Bank of America Merrill Lynch analyst Robert F. Ohmes reiterated a Buy rating and $22 price target.
• KeyBanc Capital Markets analyst Brett Andress reiterated an Overweight rating and $22 price target.

BofA Reviews Q3

The newly public company reported earnings of 24 cents per share, revenue growth of 7.1 percent compared to Bank of America's 6.4-percent expectation, analyst Ohmes said in a note.

The coolers and equipment segment fell slightly below expectations at a 15.7-percent decline versus the 10-percent drop BofA anticipated, the analyst said. 

“Gross margin of 49.7 percent increased 480 basis points driven by mix-shift toward direct-to-consumer & lower promotions vs. last year, which offset price reductions taken on hard and soft coolers in [the first quarter of 2018]."

KeyBanc Eyes Demand Trends 

Yeti's demand indicators are favorable, and the company is receiving a positive wholesale response for new products such as the Tundra Haul and Wine Tumblers, KeyBanc's Andress said in a note. 

Yeti is launching its first true holiday campaign, including free shipping, Yeti.com gift cards and national TV spots, the analyst said. 

"Supportive of this view, we note that proprietary Key First Look Data points toward Q4 YETI.com sales accelerating November-to-date vs. October trends.”

Raymond James: Product Launches Are Key

Revenue increased roughly 7 percent in the third quarter and is on track to grow 19.5 percent in 2018 overall, Raymond James' Wewer said in a note. Drinkware sales were significant, resulting in 37-percent growth and offsetting the 15.7-percent decline in coolers, he said. 

The company is anticipating annual revenue growth between 10 and 15 percent due to increased exposure and new product development, the analyst said. 

“The success of YETI’s new product launches will likely determine if its revenue growth reaches the high or low end of the 10-15-percent revenue growth target. Our forecast does not assume any “home-run” new products  —nor do we project any absolute failures," Wewer said. "The most important revenue drivers are YETI’s potential to expand its customer reach via greater brand awareness, expanding its geographic footprint domestically and internationally, as well as extending existing product lines.”

Price Action

Yeti shares were up 4.29 percent at $16.79 at the time of publication Friday. 

Related Links:

Yeti's IPO: What You Need To Know

A Look At Yeti's Competitors

Photo by Tony Webster/Wikimedia.