On Friday, Citi maintained its Buy rating on Yeti Holdings Inc. (NYSE:YETI) but reduced the shares price target to $47 from $50. The adjustment follows Yeti's third-quarter financial report, which showed a sales and earnings per share (EPS) beat. The company also revised its 2024 sales guidance to a 9% increase, positioning it in the middle of their projected range, and elevated its EPS forecast to $3.65, at the higher end of expectations.
Yeti reported growth in sales across all categories, channels, and geographic regions during the third quarter. This performance is viewed as a testament to the company's effective execution and the sustained appeal of its brand among consumers. The management team expressed confidence in Yeti's long-term growth prospects, which are expected to be driven by the acceleration of category and international expansion.
The firm also highlighted Yeti's ongoing efforts to diversify its supply chain. The company is on track to reduce its reliance on China for Drinkware production to 50% by the end of 2025. Despite this progress, Citi anticipates potential margin pressure in 2025 due to the evolving tariff environment, which could necessitate price increases for Yeti's products.
Citi's analyst noted the conservative nature of the company's guidance assumptions, despite the strong third-quarter performance and positive long-term growth outlook. The revised price target reflects a balance of these factors, with the firm continuing to recommend Yeti as a Buy to investors.
In other recent news, YETI Holdings , Inc. reported a 10% increase in net sales for Q3 2024, reaching $478 million, fueled by a 30% jump in international sales and robust performance across all product categories. The company also noted a 14% rise in net income to $60 million and an 18% increase in earnings per share to $0.71. The gross profit saw an 11% uptick, landing at $278 million.
The firm also highlighted its ongoing efforts to diversify its supply chain, with plans to have 50% of drinkware capacity outside China by 2025. In terms of retail expansion, YETI opened its 23rd store and is set to launch the 24th soon. For 2024, the company anticipates a 9% sales growth, focusing on wholesale performance and category growth.
In terms of future expectations, YETI projects a 9% increase in 2024 sales, with international growth around 30%. The company also expects an effective tax rate of about 24.8% for fiscal 2024 and adjusted earnings per share around $2.65, marking an 18% year-over-year growth.
However, potential impacts from freight costs and sales mix on gross margins were mentioned. Additionally, despite strong sales growth, the company expects a flat outlook for the next quarter's EPS. Despite these challenges, YETI remains optimistic about its long-term growth, focusing on health and outdoor activity trends.
InvestingPro Insights
To complement Citi's analysis of Yeti Holdings Inc. (NYSE:YETI), recent data from InvestingPro offers additional context for investors. Yeti's financial health appears robust, with InvestingPro data showing a P/E Ratio (Adjusted) of 16.36 for the last twelve months as of Q3 2024, suggesting a reasonable valuation relative to earnings. The company's revenue growth remains strong, with a 13.62% increase over the same period, aligning with Citi's observations on Yeti's performance across all categories and channels.
InvestingPro Tips highlight that Yeti holds more cash than debt on its balance sheet and that liquid assets exceed short-term obligations. These factors support the company's financial stability as it pursues supply chain diversification and international expansion, as noted in the article. Additionally, Yeti has seen a significant return over the last week, with InvestingPro data showing a 9.74% price total return, which may reflect positive market reaction to the recent earnings report and guidance update.
It's worth noting that InvestingPro offers 7 additional tips for Yeti, providing investors with a more comprehensive analysis of the company's financial position and market performance. These insights can be particularly valuable as Yeti navigates potential margin pressures and tariff challenges mentioned in Citi's report.
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