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Little Reason To Go Positive On Kohl's, Despite Q1 Beat

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Little Reason To Go Positive On Kohl's, Despite Q1 Beat
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Kohl's Corporation (NYSE: KSS)'s first-quarter earnings beat and growing profit, coupled with an attractive 6-percent dividend yield isn't enough to gain the support of analysts at UBS.

UBS's Michael Binetti maintains a Neutral rating on Kohl's stock with an unchanged $44 price target as the company's earnings report did contain some less-than-stellar metrics.

Justification For Staying Sidelined

Perhaps most notable, Kohl's 2.7 percent same-store sales decline implies total transactions continued to fall by a mid-single-digit percentage point year-over-year. Also, the reported same-store sale metric was short of the analyst's own expectations of a 1.5-percent decline, even worse than the consensus estimate that called for a 1.2-percent decline.

While bulls will describe Kohl's as a solid free cash flow yield story, the analyst noted operating cash flow in the quarter was just $46 million versus $146 million in the same quarter a year ago.

Among the positive aspects of the report, Binetti highlighted the company's commentary in which management said that sales and traffic improved in March and April after a weak February. But since February accounts for 28 percent of the quarter, it is uncertain if March and April combined were positive even when factoring in the launch of Under Armour Inc (NYSE: UAA) products in March.

Bottom line, the analyst is mixed on improving same-store sales trends after the first quarter and there is currently "little reason" for any positive earnings per share revisions in at least the near term.

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Image Credit: By MB298 (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Latest Ratings for KSS

DateFirmActionFromTo
Nov 2017Morgan StanleyMaintainsUnderweight
Nov 2017BairdUpgradesNeutralOutperform
Oct 2017Telsey Advisory GroupUpgradesMarket PerformOutperform

View More Analyst Ratings for KSS
View the Latest Analyst Ratings

Posted-In: Michael Binetti retailAnalyst Color Earnings News Guidance Reiteration Analyst Ratings Best of Benzinga

 

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