On Thursday, Goldman Sachs maintained a Neutral rating on Birkenstock Holding plc (NYSE: NYSE:BIRK), with a price target of $58.50. The company's third-quarter performance exhibited a solid currency-neutral (cFx) sales growth of 19%, albeit slightly below the market expectations of 21% according to Visible Alpha Consensus Data and Goldman Sachs Estimates (GSE) at 20%.
Birkenstock's business-to-business (B2B) division exceeded expectations, but the direct-to-consumer (DTC) channel experienced a slowdown due to a shift in consumer behavior from online shopping to other channels.
The renowned footwear company reported an adjusted EBITDA of €186 million for the third quarter, which translates to an adjusted EBITDA margin of 33.0%, down 140 basis points year-over-year.
This performance was largely consistent with both Goldman Sachs and Visible Alpha Consensus Data projections, which anticipated a margin of 32.9%. Birkenstock's management reaffirmed its full-year 2024 guidance, expecting a 20% growth in currency-neutral terms and an adjusted EBITDA margin between 30% and 30.5%.
The third quarter showcased Birkenstock's strong brand momentum, especially within the B2B sector, which saw a 23% growth in cFx, marking a slight increase from the 21% growth in the first half of 2024.
Despite this, the absence of an upgraded full-year outlook and the deceleration in DTC sales growth, which was at 14% in the third quarter after a 29% rise in the first half, suggests limited potential for earnings surprises as the company approaches the typically quieter autumn and winter seasons.
Goldman Sachs adjusted its forecasts and reduced its 12-month price target for Birkenstock by 2% to $58.50. The valuation is based on a forward price-to-earnings (P/E) multiple of 27 times the estimated earnings for the fiscal year 2025. The investment firm's neutral stance reflects a balanced view on the stock's potential for growth against the current market expectations and valuation metrics.
In other recent news, Birkenstock has reported record-breaking revenue for the third quarter of fiscal year 2024. This performance was driven by a 19% increase in constant currency terms, with robust demand noted across all segments and channels. The company's focus on closed-toe silhouettes and premium products significantly contributed to the sales increase.
Despite this success, Birkenstock experienced a slight decline in gross profit margin due to capacity expansion and a shift in channel mix. However, the adjusted EBITDA reached an all-time high of EUR186 million, with a margin of 33%.
Birkenstock's management expressed confidence in meeting the upper end of the fiscal year 2024 guidance for revenue growth and adjusted EBITDA margin. The company is also aiming to reduce net leverage to 2x by the end of the year.
InvestingPro Insights
As we delve into the financial health and market performance of Birkenstock Holding plc (NYSE: BIRK), it's worth noting the company's strong gross profit margins, which stand at an impressive 60.85% over the last twelve months as of Q2 2024. This robust margin underscores the brand's pricing power and operational efficiency. Additionally, Birkenstock's market capitalization currently sits at $11.4B, reflecting its significant presence in the market. Despite trading at a high earnings multiple with a P/E ratio of 104.36, the company has demonstrated a compelling year-to-date price total return of 24.56%, showcasing investor confidence and market momentum.
InvestingPro Tips highlight that Birkenstock is expected to grow its net income this year, with 6 analysts having revised their earnings upwards for the upcoming period. This aligns with the company's solid performance and may indicate potential for continued growth. Moreover, Birkenstock's liquid assets exceed its short-term obligations, suggesting a strong liquidity position that could support its operations and strategic initiatives.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on Birkenstock, providing deeper insights into the company's financials and market prospects. These insights, available at https://www.investing.com/pro/BIRK, include an array of metrics and expert evaluations designed to inform investment decisions.
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