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On Monday, in response to the US and China agreeing to a 90-day tariff reduction, Jefferies has recommended investors to purchase shares of Five Below Inc (NASDAQ:FIVE), Nike Inc (NYSE:NKE), Sanchez Energy Corporation (OTCMKTS:SN), and YETI Holdings Inc (NYSE:YETI). This announcement follows the two nations’ decision to de-escalate their ongoing trade war, with tariff reductions set to take effect on May 14th. According to InvestingPro data, YETI currently trades near its 52-week low of $26.61, potentially presenting an attractive entry point for investors. The company maintains strong fundamentals with a healthy current ratio of 2.58 and more cash than debt on its balance sheet.
The US and China have reached a consensus to implement a 90-day pause on tariffs, which will see the US decrease tariffs from 145% to 30%, and China will reduce duties from 125% to 10%. This significant reduction in tariffs is expected to relieve some of the financial pressures faced by businesses importing and exporting goods between the two countries. For YETI, which has seen its stock price decline by nearly 32% over the past six months, this development could provide significant upside potential. InvestingPro analysis suggests the stock is currently undervalued, with 10+ additional ProTips available to subscribers.
Jefferies has identified FIVE, NKE, SN, and YETI as companies that are well-positioned to benefit from the tariff de-escalation. The firm points out that these brands have implemented strategies to mitigate the impact of the trade war and should experience lower costs during the interim period. The scale and strength of these brands have allowed them to navigate through the tariff-related challenges so far. YETI’s robust gross profit margin of 58% and strong cash flow generation demonstrate its operational efficiency. Discover more detailed insights about YETI and 1,400+ other stocks through comprehensive Pro Research Reports available on InvestingPro.
The reduction in tariffs comes as a welcome development for many businesses that had been planning based on the higher tariff rate of 145%. With the new agreement in place, management teams of the recommended companies are likely to see a significant decrease in costs, providing a more favorable business environment.
As trade discussions continue throughout the 90-day pause, there is potential for a long-term deal that could further stabilize the economic relationship between the US and China. This could lead to sustained benefits for the companies that Jefferies has recommended, as well as for the broader market.
In other recent news, Yeti Holdings Inc. reported its first-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.31 compared to the forecasted $0.27. Revenue also exceeded projections, totaling $351.1 million against an expected $347.5 million. Despite this strong performance, Yeti has adjusted its full-year EPS guidance downward due to significant tariff impacts, estimating an additional $100 million in costs for the fiscal year 2025. The company is actively working to diversify its supply chain to mitigate the impact of a 145% tariff rate on goods imported from China, which affects about 90% of Yeti’s China-related costs.
Analysts at Stifel have adjusted their outlook on Yeti, reducing the stock price target from $34 to $31 while maintaining a Hold rating. This revision reflects caution over potential challenges in the U.S. market and broader market trends, despite Yeti’s solid Q1 performance. Yeti is focusing on reducing its China-to-U.S. exposure to just 5% of total COGS by the end of fiscal year 2025. The company is also anticipating a 300 basis point reduction in revenue growth due to inventory supply disruptions.
Yeti’s international sales surged by 22%, underscoring strong global demand, while its direct-to-consumer segment grew by 4%. However, Drinkware sales declined by 4%, highlighting challenges within specific product categories. The company plans to launch 30 new products in 2025, emphasizing its commitment to product innovation and supply chain transformation. Despite these efforts, operating income fell by 11%, and net income decreased by 12%, reflecting increased operational costs.
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