Asia FX moves little with focus on US-China trade, dollar steadies ahead of CPI
Investing.com - Wells Fargo (NYSE:WFC) has maintained its Overweight rating and $90.00 price target on Kontoor Brands (NYSE:KTB), despite anticipating a reduction in the company’s full-year earnings guidance due to tariff pressures. The apparel manufacturer, currently valued at $3.94 billion, maintains a "GREAT" financial health rating according to InvestingPro analysis, with a perfect Piotroski Score of 9 indicating strong operational efficiency.
The financial services firm expects Kontoor to lower its official fiscal year earnings per share (EPS) guidance from the current $5.40-$5.50 range to approximately $5.20-$5.30 when it reports second-quarter results. This adjustment primarily reflects the incorporation of approximately $0.70 in tariff-related headwinds that were previously excluded from guidance. Current consensus among analysts tracked by InvestingPro projects FY2025 EPS at $5.33, with the stock trading at a P/E ratio of 17.17x.
Tariffs represent a material challenge for Kontoor, creating an estimated $50 million headwind to the fiscal year plan, split between $35 million in organic business impact and $15 million from the recently completed Hurley Holdings acquisition, which has significant exposure to Chinese sourcing. Despite these challenges, the company maintains strong liquidity with a current ratio of 2.78 and operates with moderate debt levels. Get deeper insights into Kontoor’s financial resilience with a comprehensive Pro Research Report, available exclusively on InvestingPro.
Despite these challenges, Wells Fargo identifies several offsetting factors, including approximately $0.15 in organic tariff mitigation, $0.15 in Hurley Holdings mitigation from China tariff reductions, $0.15 in new Hurley synergies not currently included in guidance, and at least $0.05 in second-quarter upside versus plan.
The firm notes that while recent news about potential Vietnam tariffs could impact Kontoor, which sources from third-party vendors in the region, any effect is expected to be minimal and unlikely to affect the balance of the year given timing considerations.
In other recent news, Kontoor Brands has reported its first-quarter earnings for 2025, surpassing Wall Street expectations with an adjusted earnings per share (EPS) of $1.31, marking a 13% increase year-over-year. However, the company’s revenue slightly missed forecasts, coming in at $622.9 million against an expected $626.3 million. The completion of the acquisition of Helly Hansen is anticipated to diversify Kontoor’s portfolio and enhance its market presence, with the acquisition expected to positively impact revenue and earnings by 2025.
Analysts from Goldman Sachs have reinstated coverage of Kontoor Brands with a Buy rating and set a price target of $85, citing the Helly Hansen acquisition as a strategic move to expand the company’s market reach. Meanwhile, Stifel has maintained a Hold rating on the stock with a $72 price target, noting the acquisition’s potential to shift Kontoor’s focus to higher-growth markets. Barclays (LON:BARC) has also raised its price target for Kontoor Brands to $86, maintaining an Overweight rating and highlighting the company’s resilience amid industry disruptions.
Kontoor Brands’ CEO, Scott Baxter (NYSE:BAX), expressed confidence in the integration of Helly Hansen, expecting it to create shareholder value and align with the company’s growth strategy. The company’s strategic initiatives, including supply chain optimization and SKU rationalization, have contributed to an expanded gross margin of 47.7%. Despite some challenges, such as a slight revenue miss and potential tariff impacts, Kontoor Brands remains optimistic about its growth prospects and operational efficiencies.
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