Shares of Wolverine World Wide (NYSE:WWW) are getting a boost as UBS upgraded the stock to Buy from Neutral, attributing the bullish outlook to the company’s “underappreciated” growth potential and investments that will drive a turnaround in its two largest brands, Merrell and Saucony.
UBS also hiked its target price by 54% to $20, putting the company’s valuation in line with peers in terms of price/earnings, price/sales, and free cash flow.
The upgrade was based on UBS’ expectation that WWW’s sales growth rate will accelerate thanks to a streamlined portfolio and reallocated resources to the Active segment, as well as upside potential to the company’s FY24 and FY25 EPS forecasts, currently at 13% and 11%, respectively, above the Street’s consensus.
“We think the combination of [mid-single digit percentage] sales growth, ongoing operating margin recapture, and incremental [free cash flow] deployment towards debt repayment and share repurchases should drive 24% 4-yr EPS CAGR post FY24,” analysts Mauricio Serna and Jay Sole said in Friday’s research note.
Shares are up by 6%.
