FTSE 100: Index falls as earnings results weigh; pound below $1.33, Bodycote soars
On Friday, TD Cowen maintained a Hold rating on Kering (EPA:PRTP) SA (KER:FP) (OTC: PPRUY) with a consistent price target of EUR260.00. According to InvestingPro data, the luxury goods company currently trades near its 52-week low of $21.69, while maintaining impressive gross profit margins of 73.75%. The firm expressed optimism regarding the long-term growth potential of Gucci, under the new creative direction of Demna. Gucci is expected to benefit from innovative core collections and upcoming product launches, including revamped core handbags. However, concerns about persistent negative trends at Gucci were highlighted, with the brand’s carryover products performing below expectations.
Despite the challenges, TD Cowen analysts are hopeful about Gucci’s stabilization and its ability to generate excitement through new creative leadership. They anticipate that Demna’s influence will have a significant commercial, cultural, and artistic impact. The firm also noted stable trends in the Asia-Pacific region and China, which have not deteriorated further.
Kering’s stock has shown resilience, with a 5% year-to-date increase compared to the S&P 500’s 6% decline. This positive performance has led to an expansion in the price-to-earnings (P/E) multiple to 19 times, surpassing the three-year average of 15 times. Despite cautious street estimates, investor sentiment appears to be growing more positive regarding Gucci’s turnaround prospects.
TD Cowen’s caution is reflected in their projections for Gucci’s organic sales, which are estimated to decline by 19% in the first quarter, in contrast to the street’s expectation of a 14% decrease. However, there is an anticipation of improvement in the second half of the year, with a projected increase of 1% due to the assimilation of new products and more favorable comparisons.
The firm also conducted a revenue sensitivity analysis, which suggests that each percentage point of revenue deviation from their base case of a 1% decline for the total company in FY25E could result in an approximate 10-12% change in earnings per share (EPS). This analysis underscores the significance of Gucci’s performance and its new product success in influencing Kering’s overall financial outcomes. With the next earnings report due on April 17, 2025, InvestingPro subscribers can access comprehensive financial health scores and additional ProTips to better evaluate the company’s turnaround potential.
In other recent news, Kering has seen its stock target raised by TD Cowen to €260, up from the previous €222, while maintaining a Hold rating. This adjustment reflects a valuation based on revised forward-year earnings per share estimates for the fiscal year 2026. Kering is in the midst of strategic changes, including accelerating product launches and restructuring its distribution network, which involves closing directly owned stores and reducing wholesale exposure. Gucci, which accounts for nearly 70% of Kering’s earnings before interest and taxes, is in a transition period that has sparked investor caution due to uncertainties about sales recovery. The brand plans to introduce up to 50% new products in the first half of 2025, compared to about 30% historically, as it shifts focus towards timeless appeal. Despite easier comparisons anticipated in fiscal year 2025, TD Cowen has moderated its earnings per share estimate for Kering to €11.19, below the consensus of €11.99, reflecting concerns over Gucci’s sales recovery. The firm’s projections include a 2.5% decline in Gucci’s sales for the next year, factoring in a conservative outlook for the first half amidst new product introductions and market volatility, particularly in China. The performance of Gucci’s new handbag lines—Emblem, B bag, and Blondie—is being closely monitored as a key indicator of the brand’s ability to adapt to its customer base.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.