Carter's, Inc. (NYSE:CRI) seems better positioned for earnings upside into the Fall and Holiday season, according to DA Davidson.
The Analyst
DA Davidson’s John Morris upgraded Carter’s from Neutral to Buy while raising the price target from $91 to $110.
The Thesis
While sector-wide consolidation turbulence has eased, Carter’s cost and investment pressures have diminished, Morris said in the upgrade note.
With the easing of consolidation turbulence in the children’s sector, the analyst expects the company to gain market share through the rest of the year and into 2020, especially in the wholesale mass-market channel and in the baby category.
He further expects cost pressure headwinds to begin to “turn into tailwinds,” with an easing of freight, labor and consolidation pressures.
Channel checks indicate that Carter’s brands at mass-marketers are gaining momentum, Morris said, while adding that their proprietary Davidson Datamining indicates “a significant inflection in stronger pricing power and improved markdown cadence,” which suggests the company could report earnings and margin upside in the third quarter of 2019.
Morris further noted that Carter’s had a robust balance sheet and strong cash flow, and that the stock could return to its historical levels.
Price Action
Shares of Carter’s had risen a little over 1% to $91.50 at the time of publishing on Wednesday.
Related Links
Benzinga's Top Upgrades, Downgrades For October 2, 2019
Carter's Delivered A Q2 Beat, But Will Face Back-Half Headwinds, DA Davidson Says
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