Columbia Sportswear Downgraded Ahead Of Q2 Print

Columbia Sportswear Company (NASDAQ: COLM) continues to boast a strong brand portfolio but after strong gains in the stock over the past year the valuation is now "stretched."

The Analyst

B. Riley FBR's Susan Anderson downgraded Columbia Sportswear from Buy to Neutral but with a price target lifted from $81 to $84.

The Thesis

Columbia Sportswear's stock is now trading at 24.6 times next year's earnings, which represents a premium to the five-year average of 20.8 times next year's earnings, Anderson said in a note. Despite a downgrade, the company's best-in-class brands and management's strong execution remain unchanged.

What To Expect From Q2

Columbia Sportswear is scheduled to report its second-quarter results on July 26. Anderson expects the following:

• EPS loss of 12 cents per share.

• Net sales growth of 11 percent, gross margin expansion of 110 basis points and SG&A de-leverage of -80 basis points.

• Recent checks suggests an improvement in promotional level of sporting goods and flat promotional activity year-over-year in the direct channel.

• Inventory levels to benefit from a prolonged cold weather streak in the first quarter.Improvements in supply chain systems helped manage inventory and boost gross margins.

• Confirmation the international business remains strong in Europe and China and continues to improve in South Korea and Russia.

Price Action

Shares of Columbia Sportswear were trading around $93.25 Wednesday afternoon.

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