Wolverine Worldwide Slips Into A Comfortable Buying Opportunity
Shoe and apparel retailer Wolverine Worldwide (NYSE: WWW) has been dealing with its share of pandemic-related and supply chain issues and that has been seen in the share price. The price action peaked early in 2021 and has been in a downtrend ever since. We think that downtrend may be ending for a variety of reasons that begin with the institutional activity. The institutions have bought the stock like crazy over the past 4.5 quarters and that buying is still strong today. The institutions have bought a net $204 million worth of the stock in that time period which is worth about 10.6% of the market cap today. That buying has their ownership up to near 95.5% with the insiders and large shareholders holding about 4.75%.
The analysts still see potential in this name as well. The recent trend has seen sentiment cool a bit but the consensus rating and price target are still bullish. The consensus rating is a weak Buy and the most recent activity includes one downgrade to Neutral and several price target reductions. The consensus price target is near $38.90 or about 66% above the recent price action but this too has been cooling off. The consensus of the analysts who’ve issued notes in 2022 is closer to $31.50 which is still about 35% above the current price action. In our view, the Q4 results may not inspire upgrades or target increases but it doesn’t point to downgrades either. More likely, we’ll see the analysts sit tight until the next reporting season when we expect to start more chatter about strength in the back half of the year.
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Wolverine Worldwide Has Mixed Quarter, Shares Move Lower
Wolverine Worldwide had a decent quarter despite the impacts of inflation and supply chain disruptions. The bad news is that revenue beat the consensus target and margins widened but not by enough to meet the analyst's expectations. The $635.6 million in revenue is up 24.7% from last year and beat by 85 basis points but the earnings are only as expected. The 24.7% includes the addition of Sweaty Betty which added roughly 1500 basis points to the net. The adjusted revenue is up 9.4% from last year and still below the 2019 levels. eCommerce, a pillar of the company’s growth strategy, is up 58.3% including Sweaty Betty, 105.8% versus 2019, and 12.8% adjusted. The adjusted eCommerce figures are up 48.5% versus 2019 proving the effectiveness of the strategy.
Moving down to the income, GAAP and adjusted gross and operating margins all expanded versus last year. Margins widened 110 to 160 basis points (3800 at the GAAP operating level but there are one-off factors in play) which left the adjusted EPS exactly as expected. This is good news except for the revenue strength which we would like to have seen carry through to the bottom line.
Looking forward, there is another headwind weighing on price action but we see it leading to higher prices later in the year. The company issued favorable guidance for both revenue and earnings that includes margin expansion but with the consensus figures in the top half of the respective ranges. In our view, this provides an opportunity not only to outperform the consensus but also the guidance assuming the supply chain does clear up by or during the 2nd half of the year.
The Technical Outlook: Wolverine Worldwide Falls To 18-Month Low
Shares of Wolverine Worldwide fell in the wake of the Q4 report and may fall further. The price action looks bearish and is confirming the downtrend but there are signs of overextension in the indicators. Those signs include divergence in the MACD and oversold conditions in both the MACD and stochastic that could lead to a snap-back rally at any time. In our view, price action may fall further but we think a bottom is near and may be reached before the next reporting cycle. If not, price action could easily fall to the $21 or even the $17 range but we don’t think that will happen with the institutions so comfortable with this stock.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Wolverine World Wide (WWW) | $23.61 | +3.2% | 1.69% | -26.53 | Moderate Buy | $18.00 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
