Steven Madden Ltd.'s shares rose Monday after a pair of Goldman Sachs analysts upgraded their rating on the company's stock.
THE SPARK: Analysts Taposh Bari and Chad Sutherland upgraded their rating on the shoe maker to "Buy" from "Sell" and raised their price target on the stock to $69 from $43. The analysts said in a research note that the recent resumption of its share repurchase program is just the tip of the iceberg for the company, they believe more meaningful buybacks, dividends and potentially mergers and acquisitions could be ahead.
THE BIG PICTURE: Steven Madden reported last week that its second-quarter net income rose 8 percent as the shoe company opened new stores, discounted less and sold more accessories through other retailers. But the company said its retail environment remained "challenging."
The analysts said the company is still coping with an overall industry slowdown in footwear sale, but believe the company has a strong pipeline of products for the second half of the year, as well as opportunities to lower costs.
THE ANALYSIS: The analysts said in a research note that it believes signs, such as the resumption of share repurchases, are pointing toward the company putting its balance sheet to work for shareholders over the next year.
They said that low interest rates, a stable economic backdrop and other conditions are leading many companies to explore other tactics to extract shareholder value and they believe Steve Madden may follow a similar path, given its cash-rich balance sheet.
SHARE ACTION: Shares increased $1.91, about 3.6 percent, to $55.22 by early afternoon. Shares hit as high as $55.99 earlier in the day Monday, a new all-time trading high for the company. Its stock has been climbing steadily since June.