Analyst: For Wolverine World Wide, The 'Heavy Lifting' Is Done

After a multiyear restructuring effort by Wolverine World Wide, Inc. WWW the  "heavy lifting" is now complete and a D.A. Davidson analyst said he's taking a bullish stance. 

The Analyst

D.A. Davidson's Andrew Burns upgraded Wolverine World Wide's stock from Hold to Overweight with a price target boosted from $33 to $36.

The Thesis

Over the past two years, Wolverine World Wide divested poor-performing brands, completely exited unprofitable segments, streamlined its supply chain and brought in new executives to the management team, Burns said in a Thursday note.

Throughout the transition, the footwear and apparel name posted revenue declines and large one-time charges, but Wolverine is now "the best positioned it has been in years" and is even situated to pursue acquisitions, Burns said. 

Wolverine is expected to deliver a sustainable organic growth rate and a 12-percent-plus operating margin given its lean inventories, investments in brands, good order visibility and an improved retail backdrop, the analyst said. During the company's fourth-quarter report Wednesday, management guided full year 2018 EPS to be $1.95 to $2.05 and revenue to be $2.24 to $2.32 billion.

The high ends of both metrics are "plausible" given a "healthy brand momentum," Burns said. 

The prospect of 25-percent EPS growth in fiscal 2018 coupled with improved organic growth now justifies a bullish stance on the stock, the analyst said. 

Price Action

Shares of Wolverine World Wide were trading higher by 4.30 percent at $30.78 Thursday afternoon. 

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