Morgan Stanley Maintains Equal-weight on Williams-Sonoma (WSM) Following 2Q15
Morgan Stanley maintained an Equal-weight rating and $86.00 price target on Williams-Sonoma (NYSE: WSM) following the company's 2Q15 earnings results. Q2 EPS came in at $0.58, in line with consensus; but without $0.03 of tax benefits, EPS would have been $0.55.
Analyst Simeon Gutman commented, "Our key takeaway from Q2 is that WSM's underlying business is in fine shape but results were clouded by temporary noise. Q2 EPS came in at $0.58, in line with consensus; but without $0.03 of tax benefits, EPS would have been $0.55. The quarter was driven by in-line brand comps of 6.3% but much weaker flow-through with 80 bps of EBIT margin erosion. However, the bulk of this margin pressure was expected and/or self-induced as the company is investing in its supply chain. We estimate adjusted Q2 EBIT margin would have risen modestly (~10 bps) were it not for port issues/investments. As we've seen historically, WSM has a strong track record of generating returns on its investments and we fully expect flow-through to resume to more normalized levels (~13-15%)."
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Shares of Williams-Sonoma closed at $83.12 yesterday.