On Monday (NASDAQ:MNDY), TD Cowen adjusted its outlook on Yeti Holdings Inc. (NYSE: NYSE:YETI) shares, reducing the price target on the company's shares to $44 from $46 while maintaining a Hold rating. The adjustment comes amid concerns over the potential impact of tariffs on China imports following Donald Trump's election victory.
The firm's analyst noted that Yeti Holdings had a strong performance in the third quarter, delivering double-digit sales growth and an 11% year-over-year increase in EBIT. However, looking ahead to fiscal years 2025 and 2026, the analyst anticipates that new tariffs could negatively affect the company's gross margin and earnings per share (EPS).
The revised financial models take into account a 200 basis point impact from tariffs, which is a significant increase from the 100 basis point impact seen in fiscal year 2018. The analyst emphasized that while the exact outcomes are uncertain, it is prudent to adjust estimates below the consensus in anticipation of these potential challenges.
The report concluded with a revised price target of $44 for Yeti Holdings Inc., reflecting the analyst's cautious stance in light of the expected economic conditions and their possible effect on the company's future profitability.
In other recent news, Yeti Holdings Inc. reported strong third-quarter results, with a 10% increase in net sales totaling $478 million. This growth was fueled by a 30% surge 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. Yeti's gross profit saw an 11% uplift, landing at $278 million.
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.
Piper Sandler and Citi have both adjusted their price targets for Yeti, with Piper Sandler maintaining an Overweight rating and Citi maintaining a Buy rating. Both firms have highlighted Yeti's ongoing efforts to diversify its supply chain, with plans to have 50% of drinkware capacity outside China by 2025. Despite potential impacts from freight costs and sales mix on gross margins, Yeti remains optimistic about its long-term growth.
InvestingPro Insights
To complement TD Cowen's analysis of Yeti Holdings Inc. (NYSE: YETI), recent data from InvestingPro provides additional context for investors. Despite the concerns over potential tariffs, YETI has demonstrated solid financial performance. The company's revenue growth stands at 13.62% over the last twelve months, with a robust gross profit margin of 58.35%. This suggests that YETI has maintained strong pricing power and operational efficiency.
InvestingPro Tips highlight that YETI holds more cash than debt on its balance sheet, indicating financial stability in the face of potential economic headwinds. Additionally, the company's cash flows can sufficiently cover interest payments, which could provide a buffer against the impact of tariffs on profitability.
However, investors should note that YETI's stock price movements are quite volatile, which aligns with the analyst's cautious stance. The company's P/E ratio of 16.71 suggests a moderate valuation, potentially reflecting the market's consideration of both growth prospects and risks.
For those seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into YETI's financial health and market position.
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