On Friday, Loop Capital adjusted its financial outlook for footwear retailer Caleres (NYSE:CAL), reducing the stock price target to $25 from the previous $30 while maintaining a Hold rating on the stock. The stock, currently trading at $26.57, has fallen nearly 15% in the past week and is approaching its 52-week low of $26.05.
According to InvestingPro analysis, Caleres appears undervalued compared to its Fair Value estimate. The revision follows Caleres' report of lower-than-expected sales and earnings for the third fiscal quarter.
The analyst from Loop Capital expressed concerns about the company's performance, noting the short holiday selling season due to five fewer days between Thanksgiving and Christmas this year. The potential for unrecovered bootie sales, which were affected by unfavorable weather this Fall, was also a point of worry.
The expectation of cautious wholesale orders from department stores and specialty shoe stores adds to the cautious stance. Despite these challenges, InvestingPro data shows that Caleres maintains a strong track record with 54 consecutive years of dividend payments, demonstrating consistent shareholder returns even during difficult periods.
The analyst also highlighted apprehension regarding the need for Caleres' brand portfolio to potentially employ more aggressive strategies to clear inventory by the end of the year. This comes in light of the consensus outlook for fiscal 2024 operating earnings per share (EPS), which was 63 cents higher than Loop Capital's new estimate. Furthermore, the firm has lowered its fiscal 2025 EPS estimate for Caleres by $0.61.
Despite these concerns, Caleres' stock is still considered to be trading at an attractive valuation, with 7 times the 2025 EPS estimate and 6 times the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio. Current financial metrics support this view, with a P/E ratio of 7.4 and an EV/EBITDA of 7.37.
For deeper insights into Caleres' valuation and growth potential, including access to comprehensive financial health scores and additional ProTips, investors can explore the detailed analysis available on InvestingPro. However, the analyst indicated that without a restoration of earnings and sales momentum, the stock is unlikely to experience a significant rebound.
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