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A month has gone by since the last earnings report for Wolverine World Wide (WWW). Shares have added about 8.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wolverine due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Wolverine Beats Earnings & Revenue Estimates in Q3
Wolverine World Widedelivered better-than-expected results in third-quarter 2020. Quarterly results, which outpaced management’s expectations, reflected strength in the company’s portfolio and brands. Apparently, Saucony and Chaco registered double-digit revenue growth, whereas Merrell and work brands saw robust revenue growth sequentially. Also, the company is benefiting from its digital efforts.
However, management expects coronavirus-induced challenges to persist in the near term, and consequently, fourth-quarter revenues are likely to decline nearly 25% year over year. This will include the impact of a partial shift in revenues from the company’s international business into first-quarter 2021. Nevertheless, Wolverine believes that its robust digital strategy and increased visibility to wholesale demand will help the company revert to significant growth in the first quarter of 2021.
Wolverine’s third-quarter adjusted earnings of 35 cents per share outpaced the Zacks Consensus Estimate of 29 cents. However, the metric plunged 48.5% from 68 cents earned in the year-ago quarter. On a constant-currency (cc) basis, adjusted earnings were 34 cents per share.
Moreover, revenues of $493.1 million came above the Zacks Consensus Estimate of $458 million but fell 14.1% year over year. On a cc basis, revenues declined 14.6%. The year-over-year downside can probably be attributed to the ill impacts of the pandemic. However, the company’s owned e-commerce business excelled in the quarter, with revenues surging 56.4% year over year.
Gross profit amounted to $202 million, down nearly 17% year over year. Also, gross margin contracted 140 basis points (bps) year over year to 41%.
Further, adjusted selling, general and administrative expenses dropped 6.9% to $151.5 million. However, adjusted operating profit tumbled 35.3% to $52.3 million, with adjusted operating margin contracting 350 bps to 10.6%.
Revenues at Wolverine Michigan Group decreased 9.9% year over year to $287.3 million. At cc, the segment’s revenues fell 10.2% during the reported quarter.
Wolverine Boston Group’s revenues tumbled 19.7% to $193.8 million from the year-ago quarter. At cc, the segment’s revenues decreased 20.3% during the reported quarter.
The company ended the quarter with cash and cash equivalents of $342 million, long-term debt of $714.1 million and stockholders' equity of $765.5 million. Further, the adjusted net inventories in the third quarter decreased 22.9% to $322.1 million.
Notably, Wolverine has delivered nearly $135.5 million of cash flow from operations in the first nine months of 2020. Net cash generated from operating activities was $96.5 million during the third quarter of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -62.5% due to these changes.
Currently, Wolverine has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wolverine has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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