On Wednesday, Steven Madden , Ltd. (NASDAQ:SHOO) experienced a change in stock rating as Citi downgraded the company's status from Buy to Neutral. The footwear and accessories retailer's new price target has been set at $41.00 by the financial services firm.
The downgrade comes just before the company's fourth-quarter earnings report, expected to be released before the market opens on February 28, 2024. Citi anticipates a slight outperformance for the quarter, with earnings per share (EPS) predictions at $0.59, marginally higher than the consensus estimate of $0.57. Citi acknowledges that Steven Madden has managed well in a challenging fiscal year 2023.
Looking ahead to fiscal year 2024, Citi expresses caution regarding Steven Madden's earnings potential due to several factors. These include anticipated margin pressures from increased freight costs, potential for heightened promotions in the retail sector, and higher private label sales in wholesale. Additionally, the impact of the Almost Famous (AF) brand is a concern for the analyst.
Management's guidance for fiscal 2024 EPS is also a point of focus, with Citi estimating a conservative range of $2.40 to $2.50, compared to the consensus estimate of $2.74. This conservative outlook is influenced by the company's performance amid solid fashion trends, which could lead to a turnaround in Steven Madden's core wholesale footwear business in the spring of 2024.
The adjustment in rating follows a notable 25% increase in Steven Madden's share price since early November. With the stock currently trading at around 12.5 times Citi's fiscal year 2024 estimated enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the firm suggests that the risk/reward profile for Steven Madden is now more balanced. This reassessment is supported by insights gathered from a recent management meeting at the FFANY shoe show.
InvestingPro Insights
As Steven Madden, Ltd. (NASDAQ:SHOO) braces for its upcoming fourth-quarter earnings report, investors are closely monitoring the company's financial health and market performance. According to real-time data from InvestingPro, Steven Madden holds a market capitalization of $2.96 billion USD. The company's P/E ratio, a key metric for valuation, stands at 17.56, indicating a potentially reasonable valuation relative to earnings.
InvestingPro Tips reveal that Steven Madden not only holds more cash than debt on its balance sheet, which is a positive sign of financial stability, but also that its liquid assets surpass short-term obligations, suggesting a strong liquidity position. These factors, coupled with a strong return over the last three months, with a 23.74% price total return, may provide investors with confidence in the company's ability to navigate the anticipated challenges cited by Citi.
Moreover, analysts predict that Steven Madden will be profitable this year, an outlook that aligns with the company's reported profitability over the last twelve months. For those seeking more comprehensive analysis, there are additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/SHOO. For a deeper dive into Steven Madden's financials and market prospects, readers can use coupon code "SFY24" to get an additional 10% off a 2-year InvestingPro+ subscription, or "SFY241" to get an additional 10% off a 1-year InvestingPro+ subscription.
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