UBS cuts Kontoor Brands target to $96, keeps Buy rating

On Friday, UBS analyst Mauricio Serna adjusted the price target for Kontoor Brands (NYSE:KTB), a global lifestyle apparel company, from $108.00 to $96.00 while maintaining a Buy rating on the stock. The revision follows a 22% decline in Kontoor Brands’ share price subsequent to the company’s fourth-quarter 2024 financial report. The stock currently trades at $67.25, having dropped 23.5% in the past week. InvestingPro data shows multiple indicators suggesting the stock is in oversold territory.

The share price drop is attributed to concerns over the company’s fiscal year 2025 outlook, which did not account for potential tariff impacts. In response to these concerns, UBS has revised its earnings per share (EPS) estimates and price target for Kontoor Brands. Despite the lowered price target, UBS remains optimistic about the company’s long-term prospects. According to InvestingPro analysis, the company maintains a "GOOD" financial health score, with liquid assets exceeding short-term obligations and moderate debt levels.

Serna highlighted Kontoor Brands’ strong fourth-quarter performance, which demonstrated robust underlying demand for its products. This was evident from the company’s point-of-sale share gains and the acceleration of direct-to-consumer sales growth. The analyst also pointed to the forthcoming acquisition of Helly Hansen as a factor that could significantly enhance Kontoor Brands’ long-term growth, although this potential is not yet factored into the base case estimates.

Looking ahead, UBS anticipates a rebound in EPS after fiscal year 2025, projecting an 11% compound annual growth rate over the next four years. As Kontoor Brands’ growth potential becomes more apparent, UBS expects market sentiment to shift positively, which could drive the stock towards the newly established $96 price target.

In other recent news, Kontoor Brands reported their fourth-quarter financial results for 2024, which exceeded analyst expectations. The company posted an earnings per share (EPS) of $1.38, surpassing the forecasted $1.33, and achieved revenue of $699 million, slightly above the anticipated $696.26 million. Despite these positive figures, Stifel analysts revised their price target for Kontoor Brands from $93.00 to $83.00, maintaining a Hold rating on the stock. The revision was influenced by the slower-than-expected benefits from Project Jeanius and the Lee brand’s challenges in pivoting to growth. Additionally, Stifel noted that Kontoor’s guidance did not include potential tariff impacts or the positive contribution from the Helly Hansen acquisition. The acquisition is estimated to add $0.15 to EPS, with potential EPS accretion of $0.37 by fiscal year 2026. Kontoor Brands is preparing for this acquisition in Q2 2025, which is expected to enhance their operational capabilities. The company also continues to focus on Project Genius, aiming for significant cost savings and reinvestment in growth.

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