Earnings Preview: Wolverine

Zacks

Wolverine World Wide, Inc. (WWW), one of the leading designers, manufacturers and marketers of branded footwear and apparel, is scheduled to report its first-quarter 2012 financial results before the opening bell on Monday, April 23, 2012.

The current Zacks Consensus Estimate for the quarter is 54 cents a share, which reflects a decline of 25% from the prior-year quarter’s earnings. The estimates in the current Zacks Consensus range between a low of 52 cent and a high of 56 cents a share. The Zacks Consensus estimates revenue at $334 million for the first quarter.

Recap of Fourth-Quarter 2011

On January 30, 2012, Wolverine posted soft fourth-quarter 2011 results. Decline in margins took a toll on the company’s earnings as Wolverine reported quarterly earnings of 47 cents a share, down 9.6% from the prior-year quarters’ earnings of 52 cents a share. However, the earnings exceeded the Zacks Consensus Estimate by a couple of cents.

Wolverine, the seller of products under Harley-Davidson Footwear, Hush Puppies, Merrell and other brands, marked an increase of 5.6% year over year in its top line to $406.5 million. However, the reported revenue lagged behind the Zacks Consensus Estimate of $412 million.

(Refer the article: Wolverine Beats, Profit Dips)

Guidance

Wolverine at its last earnings call guided fiscal 2012 total revenue in the range of $1,485 million to $1,525 million, reflecting a year-over-year growth of 5.4% to 8.2%, and projected earnings between $2.60 and $2.70 per share, representing a growth of 4.8% to 8.9% from the prior year.

Zacks Agreement & Magnitude

No movement was noticed in the Zacks Consensus Estimate for the first quarter of 2012, either in the last 7 or 30 days, since 10 analysts covering the stock kept their estimates intact, in the absence of any major news having a direct or an indirect impact on the estimates. 

Positive Earnings Surprise History

With respect to earnings surprises, Wolverine has topped the Zacks Consensus Estimate over the last four quarters by an average of 6%. Given the past performance we expect the company to outperform the Zacks Consensus Estimate this time too.

Wolverine Holds Zacks #3 Rank

Rockford, Michigan-based Wolverine enjoyed increased momentum in fiscal 2011, which we expect to continue into fiscal 2012. Moreover, we believe that the company remains well positioned to increase its market share on the strength of its brand portfolio. The Merrell brand has been the key growth driver in the past decade, and we expect it to catalyze future growth. The company’s multi-brand portfolio, geographical diversification, and multi-distribution channel strategy remain its key growth drivers.

However, given the current global macroeconomic environment and intense competition from Timberland Co. (:TBL), Deckers Outdoor Corporation (DECK) and Skechers USA Inc. (SKX), we prefer to have a long-term “Neutral” recommendation on the stock. Moreover, Wolverineholds Zacks #3 Rank that translates into short-term “Hold” rating.

Read the Full Research Report on SKX

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