On Friday, CFRA raised its rating on Carter's (NYSE:CRI) from Hold to Buy while maintaining a stock price target of $84.00. The firm's decision comes after Carter's reported a steady first-quarter earnings per share (EPS) of $0.98, which was consistent with the previous year's results and $0.21 above consensus estimates. Despite a slight revenue drop to $661 million from $696 million, it still surpassed estimates by $21 million.
In the first quarter, Carter's saw varied performance across its segments, with U.S. Retail and U.S. Wholesale experiencing declines of 5.0% and 5.7% year-over-year, respectively. Still, the International segment provided a positive note with a 2.7% increase.
The company's operating margin showed slight improvement, expanding by 20 basis points year-over-year to 8.3%, supported by favorable ocean freight rates and input costs. This was partly offset by higher fixed costs and expenses related to new store openings.
Carter's also reported a significant decrease in inventory levels, which dropped 22.9% to $473 million. The firm highlighted this as a positive development, indicating that Carter's is positioned to return to more efficient operations and stable growth. Moreover, Carter's continues to offer a quarterly dividend of $0.80, boasting an attractive yield of over 4%.
CFRA's analyst noted that Carter's stocks are currently trading near 10 times the firm's 2024 EPS estimate, which is considered an opportunity for investors. The analyst emphasized confidence in the company's valuation, based on a forward price-to-earnings (P/E) multiple that aligns with Carter's three-year average. The maintained EPS estimates for 2024 and 2025 are $6.50 and $6.75, respectively, suggesting a steady outlook for the company's financial performance.
InvestingPro Insights
With the recent assessment by CFRA, Carter's (NYSE:CRI) has demonstrated resilience in its financial performance. InvestingPro data accentuates this perspective, showing a solid market capitalization of $2.61 billion and a P/E ratio of 11.53, which aligns closely with CFRA's valuation insights.
The company's commitment to shareholder value is highlighted by a high shareholder yield and a consistent dividend history, having maintained dividend payments for 12 consecutive years, with a current yield of 4.47% and a dividend growth of 6.67% over the last twelve months as of Q1 2023.
Furthermore, analysts have revised their earnings upwards for the upcoming period, reflecting optimism in Carter's financial outlook. With Carter's profitability over the last twelve months and analysts predicting the company will be profitable this year, investors may find confidence in the company's ability to navigate market fluctuations.
Moreover, Carter's liquid assets exceed its short-term obligations, and it operates with a moderate level of debt, providing a stable financial foundation for future operations.
For those interested in a deeper dive into Carter's financial health and future prospects, InvestingPro offers additional insights and metrics. There are 6 more InvestingPro Tips available for Carter's, which can be explored at https://www.investing.com/pro/CRI. To enhance your investment analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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