KeyBanc analyst Bradley Thomas still has concerns about the industry’s health, but he's increasingly positive on the Williams-Sonoma’s execution and opportunity to drive additional EPS upside ahead.
Thomas also says tariff levels have already been factored into guidance and management is working to prepare for further expansion of the tariffs.
“While this is a risk, we also see upside potential to new guidance if WSM can continue the expense discipline in 1Q,” he wrote in a note.
KeyBanc maintains a Sector Weight rating on the stock.
Earnings Beat Misleading
Bank of America analyst Curtis Nagle wasn't as optimistic about earnings growth. The analyst said while Williams-Sonoma put up solid first-quarter numbers, he remains cautious on the company’s ability to sustainably grow operating earnings through the year.
Nagle also said the company continues to report a large divergence in GAAP and non-GAAP adjusted earnings as well as EBIT and EPS growth.
“In our opinion, this has made headline earnings numbers highlighted by the company stronger than they might otherwise appear,” said Nagle. “This is due to what we consider to be an aggressive application of updated revenue recognition standards last year, large and recurring ‘one-time’ expense adjustments and earnings growth driven primarily by share buybacks and a lower tax rate over the past two years.”
Bank of America maintains an Underperform rating and raised its price target from $42 to $45.
Wedbush: Beat Was 'Low Quality'
Wedbush analyst Seth Basham said the company has mitigated Chinese tariff pressure well, but 25-percent tariffs have yet to roll into inventory and the risk of List 4 tariffs lead to cautiousness on the demand and margin outlook.
“We give Williams-Sonoma credit for managing well through a decelerating industry growth period,” said Basham.
Basham views the first-quarter beat as "low quality" and competition risks keeps his rating at Neutral with a $63 price target.
Williams-Sonoma shares traded higher by 11.9 percent at $57.76 per share.
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|May 2019||Initiates Coverage On||Hold|
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