Puma shares took a hit last week after reporting Q2 2024 results, which showed challenges in the EEMEA wholesale sector and higher financial expenses.
According to analysts at RBC Capital Markets, these headwinds “could have been better signaled and the second quarter revenue forecast would not have had to be so high.”
“We view this as an offsetting event that could support near-term share price strength, with no real change in earnings expectations seen and the setup still focused on 4Q24 revenue acceleration on a depressed valuation,” they added.
Consensus expectations for fiscal 2025 are modest, RBC notes, with projected growth of 8%, margin expansion of 60 basis points and EBIT margin of 7.9%, which is slightly below the company's target of 8.0-8.5%.
If 4Q24 achieves low double-digit growth, driven by wholesale order fulfillment and an easier revenue base in 1H25, modest earnings improvements are possible for FY25.
“This, combined with a depressed valuation across all metrics and a recent sell-off, could support a positive outlook for the stock price in the near term,” the analysts said.
However, the competitive landscape is expected to intensify in 2025, with the return of Nike (NKE) and stronger momentum at adidas, while margin targets are contingent on mixed visibility for gross margin developments.
Citing higher financial expenses, analysts at RBC Capital Markets lowered earnings per share (EPS) estimates for Puma and cut the target price to €42 from €47.
During the earnings call, Puma highlighted expectations for double-digit revenue growth in the fourth quarter of 2024, driven by a strong wholesale order book, although IAS 29 benefits will impact reported rather than organic growth.
For the third quarter of 2024, the company expects mid-single-digit organic revenue growth, improved gross margins, but slightly lower EBIT compared to last year.
It remains confident of achieving its 8.0-8.5% margin target for fiscal 2025, with current operations in July meeting expectations and wholesale momentum accelerating.
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