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Cowen: Puma's Q4 Strength Bodes Well For Nike, Adidas Earnings

Cowen: Puma's Q4 Strength Bodes Well For Nike, Adidas Earnings

Puma AG Rudolf Dassler Sport (OTC: PMMAF) remains one of the hottest brands in athletic apparel.

The German sportswear brand finished its fiscal year with strong brand momentum after surpassing the 2 billion-euro sales mark for the first time, but the company issued a conservative EBIT outlook heading into 2019.

Puma is gaining share everywhere, and the initial FY19 guidance is fairly conservative, Cowen analyst John Kernan said in a Friday note. 

“Puma is experiencing robust geographic strength in both Asia Pacific and the Americas, two markets slated for outsize growth,” the analyst said. “Puma management commented on its Q4 earnings call that its business in China, which grew 48.6 percent ex-FX in FY18, is showing no signs of a slowdown." 

Apparel remains the fastest-growing category for Puma, but footwear also showed meaningful acceleration in Q4, Kernan said, adding that he also expects strong results from Nike Inc (NYSE: NKE) and Adidas AG (ADR) (OTC: ADDYY) in March.

Womens, Basketball A Point Of Strength 

Puma’s womens segment is a point of strength, and basketball is incremental to brand awareness, Kernan said

The launch of the Selena Gomez "Strong Girl" collection in the second half of 2018 contributed to strength in apparel, and Puma is also launching a sports cosmetics line with Maybelline that features Adriana Lima, the analyst said. 

Puma also announced this week that it has signed a multiyear partnership with the NBA, furthering its push into basketball after relaunching the category ahead of the NBA season.

“The basketball relaunch helps Puma's authentic push into performance sports, especially in the U.S.," Kernan said. 

While Puma’s multiples are not cheap, estimates should move higher, the analyst said. Cowen maintains a Market Perform rating on the company with a 454-euro ($515.09) price target on European shares.

Puma Is Fairly Valued 

Wedbush analyst Christopher Svezia is slightly less bullish on Puma, and said in a Friday note that the company is winning — but with no trophy — with its FY19 EBIT guide.

“In all, management is executing and Puma is likely to see another year of outperformance, but with shares trading at 29x our FY19 EPS estimate, the company appears fairly valued at this time,” the analyst said. 

Wedbush maintains a Neutral rating on Puma and lowered his price target for European shares from 465 euros to 450 euros.  

Related Links:

Cowen Weighs Puma's Market Share Opportunity Against Potential Athletic Apparel Slowdown, European Concerns

LeBron's Move To Los Angeles: What It Means For Nike, Adidas And Puma 

Photo courtesy of Puma. 


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