Baird Names Wolverine World Wide As Positive Fresh Pick

VF Corp VFC reported a beat-and-raise quarter, thanks to strong U.S. performance and greater-than-expected SG&A leverage, prompting an analyst at Baird to view positively the outlook for peer Wolverine World Wide, Inc. WWW.

The Analyst

Analyst Jonathan Komp maintained an Outperform rating and $40 price target on Wolverine.

The Thesis

Apart from the strength in U.S., colder January weather is likely to increase demand for cold-weather brands, resulting in cleaner channel inventories and likely supporting order books, Komp said in a note. He now has greater confidence in Q4 and 2019 estimates for Wolverine.

With the prior Q4 outlook discounting headwinds from Latin America and the Sears Holdings Corp SHLDQ bankruptcy, the analyst sees scope for upside, thanks to a potentially favorable environment and internal initiatives for Merrell and Sperry, partly offsetting low visibility at Saucony.

Baird also expects the company to guide 2019 positively, with broad-based strength across brands.

"Accordingly, we see consensus revenue/EPS growth of +3.8%/+8.8% as potentially too low, and importantly see potential for sustained top-line gains to support a re-rating higher," Komp wrote in the note.

Baird sees a favorable outlook, based on potential for continued double-digit EPS gains and valuation expansion. The return to the stock's typical slight P/E premium would mean over 25 percent one-year-out upside potential.

Price Action

Shares traded at $33.85 Thursday afternoon.

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