On Tuesday, Citi reaffirmed its Neutral stance on Steven Madden (NASDAQ:SHOO) stock, maintaining the price target at $43.00. The commentary provided by the firm centered on the anticipated third-quarter earnings per share (EPS), which is expected to be reported on November 7, before the market opens.
The forecast is set at $0.93, slightly above the consensus of $0.89, attributed to stronger wholesale sales. The firm anticipates that, similar to the first half of the year, robust growth in wholesale accessories and the impact of the AF acquisition will contribute to the third-quarter wholesale strength.
Citi also expects the management to adjust the full-year 2024 EPS guidance upwards, from the range of $2.55-$2.65 to $2.60-$2.70, versus the consensus of $2.64. This adjustment is predicted to be a direct result of surpassing third-quarter expectations. Nevertheless, the firm highlighted the potential influence of the upcoming election on Steven Madden's stock, noting that the outcome could significantly drive the stock's direction due to the company's substantial reliance on China for sourcing, which accounts for approximately 70% of their production.
The firm pointed out that if the election results in a Trump victory, the prospect of increased tariffs on goods sourced from China could become a focal point. This is because such an outcome might necessitate management to implement contingency plans to mitigate China exposure, which could be both disruptive and costly. The potential for higher tariffs poses a risk to the company's future earnings capability.
The analysis concluded by acknowledging that Steven Madden's shares are currently trading just below their recent highs, despite market indicators suggesting a potential Trump election win. This observation suggests that the risk/reward balance for Steven Madden's stock could be tilting towards the negative as the third-quarter earnings report date approaches.
In other recent news, Steven Madden has been a focal point for several analysts. Piper Sandler initiated coverage on the company, assigning a neutral rating with a price target of $45. The firm praised Steven Madden's agile business model but also noted potential risks including exposure to lower-income consumers and the impact of store closures. Telsey Advisory Group raised their price target for the company to $50, while Williams Trading reduced theirs to $39, both firms maintaining their respective market perform and hold ratings.
Steven Madden reported a strong second quarter in 2024, with an 18% rise in revenue and a 23% increase in adjusted diluted earnings per share. This growth was attributed to strategic international expansion, diversification beyond footwear, and strengthening of its U.S. wholesale footwear business.
In a significant development, Unified Commerce Group (UCG) acquired the assets of GREATS Inc., a premium sneaker brand previously owned by Steven Madden. As part of the acquisition, Steven Madden will become a shareholder in UCG. These are the recent developments in the companies.
InvestingPro Insights
To complement Citi's analysis, InvestingPro data reveals that Steven Madden (NASDAQ:SHOO) has demonstrated solid financial performance. The company's revenue growth of 10.95% over the last twelve months and a more impressive 17.57% growth in the most recent quarter underscore its strong market position. This aligns with Citi's expectation of stronger wholesale sales in the upcoming earnings report.
InvestingPro Tips highlight that Steven Madden holds more cash than debt on its balance sheet, indicating financial stability. This strong financial position could be crucial if the company needs to implement contingency plans to mitigate China exposure, as mentioned in the article regarding potential election outcomes.
Another InvestingPro Tip notes that the company is trading at a high Price / Book multiple of 4.12. This valuation metric, combined with the stock trading near its 52-week high (91.76% of the high), suggests that investors are pricing in strong future performance, which aligns with Citi's expectation of an upward revision in full-year EPS guidance.
For investors seeking a more comprehensive analysis, InvestingPro offers 3 additional tips for Steven Madden, providing further insights into the company's financial health and market position.
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