After a multiyear restructuring effort by Wolverine World Wide, Inc. (NYSE: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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