VF Corp (NYSE: VFC) reported a beat-and-raise quarter, thanks to strong U.S. performance and greater-than-expected SG&A leverage, prompting an analyst at Baird to view positively the outlook for peer Wolverine World Wide, Inc. (NYSE: WWW).
Analyst Jonathan Komp maintained an Outperform rating and $40 price target on Wolverine.
Apart from the strength in U.S., colder January weather is likely to increase demand for cold-weather brands, resulting in cleaner channel inventories and likely supporting order books, Komp said in a note. He now has greater confidence in Q4 and 2019 estimates for Wolverine.
With the prior Q4 outlook discounting headwinds from Latin America and the Sears Holdings Corp (OTC: SHLDQ) bankruptcy, the analyst sees scope for upside, thanks to a potentially favorable environment and internal initiatives for Merrell and Sperry, partly offsetting low visibility at Saucony.
Baird also expects the company to guide 2019 positively, with broad-based strength across brands.
"Accordingly, we see consensus revenue/EPS growth of +3.8%/+8.8% as potentially too low, and importantly see potential for sustained top-line gains to support a re-rating higher," Komp wrote in the note.
Baird sees a favorable outlook, based on potential for continued double-digit EPS gains and valuation expansion. The return to the stock's typical slight P/E premium would mean over 25 percent one-year-out upside potential.
Shares traded at $33.85 Thursday afternoon.
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