Piper Jaffray Says Coach Is Firmly 'On Plan' With Its Turnaround

Piper Jaffray maintains its Overweight rating on top-pick Coach Inc COH as it believes the company is "firmly on plan" with the company's turnaround strategy heading into the fourth-quarter earnings slated for August 9.

For the fourth quarter, the brokerage sees the company to top estimates (Piper Jaffray EPS: $0.40; Street: $0.41) and expects FY17 initial guidance to be constructive. Further, the brokerage expects 1.6 percent North America comp.

"While we are cognizant that the 'bar' for comp has crept up over the last month, we believe COH is one of the best stories to own in our space as we see the company heading into a period of upward earnings revisions supported by positive comps, sales leverage, sharper sourcing costs and optionality around M&A," analyst Erinn Murphy wrote in a note.

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"In Q4, we believe the assortment mix at full-price was conducive for improved AUR with the Rogue, the Dinky and the Saddle silhouettes all as strong drivers of ticket," Murphy continued.

In addition, the company's partnership with Walt Disney Co DIS was received "extremely well," driving traffic and conversion sequentially.

On this upcoming call, the analyst expects the company to guide to FY17 and feel comfortable that the consensus estimate of $2.19 (Piper Jaffray: $2.26) can be racketed in management's range — particularly as the analysts "think about the Coach brand as having a 20 percent EBIT margin."

At time of writing, shares of Coach were flat on the day, trading around the $41.64 handle. The analyst has a price target of $47.

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