On Tuesday, CFRA adjusted its perspective on Carter's (NYSE:CRI), shifting the stock's rating from Buy to Hold while maintaining a price target of $84.00. The firm's analyst cited Carter's fourth-quarter earnings, which surpassed consensus estimates, as a key factor in the reassessment.
Carter's reported a normalized Q4 EPS of $2.76 compared to $2.29 the previous year, beating estimates by $0.15. However, the company's revenue of $858 million fell short of the expected $912 million, missing by $11 million.
In the fourth quarter, Carter's saw varying performance across its business segments. U.S. Retail sales dropped by 8.9% year-over-year, while U.S. Wholesale experienced a 5.1% decline. On the other hand, the International segment showed growth, with a 4.6% increase.
The company's operating margin improved significantly, expanding by 380 basis points year-over-year to 15.9%. This improvement was attributed to several factors, including favorable ocean freight rates, reduced inventory provisions, and lower distribution and freight costs, along with decreased marketing expenses.
Carter's financial position remains robust, as highlighted by the firm's analyst. The company concluded the quarter with a strong balance sheet, boasting $351 million in cash and $497 million in long-term debt. Additionally, Carter's increased its quarterly dividend by 7% to $0.80. Looking forward, the company anticipates mid-single-digit growth in EPS and operating income for 2024.
The reassessment of Carter's stock comes after a notable 20% increase in share value. The CFRA analyst concluded that given this recent price surge, the company's shares are now fairly valued, prompting the change in rating to Hold.
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