UPDATE: Canaccord Genuity Upgrades Columbia Sportswear (COLM) to Buy
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(Updated - September 20, 2016 11:29 AM EDT)
Canaccord Genuity upgraded Columbia Sportswear (NASDAQ: COLM) from Hold to Buy with a price target of $72. The change follows meeting with management. Analyst Camilo Lyon sees a good set-up for the second half of the year and margin recovery in 2017.
"We see the pieces in place for upside to our 2H16 revenue and earnings estimates, and more importantly, a return to HSD revenue growth and midteens EPS growth in 2017," said Lyon. "Over the next four years, we believe consistent HSD revenue growth, ERP systems leverage, DTC mix shift benefits, sustained expense leverage, and diminishing FX headwinds could drive EBIT margins up to 13% from 10.6% currently, adding 68c to EPS off a base of $2.68 this year and driving $4.20 in earnings power in 2020 ($3.15 discounted to present value)."
Discussing potential for 2017 profitability in Europe, the analyst said, "Since 2015, FX has been a 150bp drag to gross margin due to FX despite improvements in the overall region's demand. Specifically, Europe has turned since the head of the region (Franco Fogliato) came on board three years ago as COLM has shifted its distribution focus to larger more credit stable retailers vs. the smaller independent community that has shrunk post the 2008 recession. As such, the brand's messaging has become unified and consistent across regions resulting in solid share gains that should help leverage marketing investments next year. Also, Russia has been a drag on the overall EMEA region given the macroeconomic challenges it has faced. That said, the ruble appears to have stabilized while COLM has worked with its distributor to manage the region's inventory to align with current levels of demand. As such, we believe the FX and sales headwind that Russia has presented can become a tailwind in 2017."
Shares of Columbia Sportswear closed at $54.74 yesterday.
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