Citi has reaffirmed its Buy rating and $19.00 price target for Amer Sports Inc. (NYSE: AS), predicting a second-quarter earnings beat. The firm expects the company to outperform market expectations when it reports earnings before the market opens on August 20, propelled by robust growth in its Arc'teryx technical apparel line.
The analyst projects a 31% increase in technical apparel sales, surpassing the consensus estimate of 23%, with direct-to-consumer (DTC) channels driving the growth. Despite concerns about a weakening global economy, particularly in China which accounts for 39% of Arc'teryx sales, the analyst remains optimistic.
Recent industry data indicates that the active and outerwear market in China is still strong, supporting the continued momentum of the Arc'teryx brand in the region.
Management is expected to revise its fiscal 2024 earnings per share (EPS) guidance upward from approximately $0.40 to $0.45, and revenue guidance from mid-teens growth to mid- to high-teens, based on the stronger performance of Arc'teryx.
The analyst's confidence is further buoyed by the resilience of the Arc brand in the face of a potential economic slowdown in China.
Amer Sports shares have declined by 25% since late June amid fears of a China slowdown. However, the analyst believes these concerns are overstated for the Arc brand and suggests that the current risk/reward ratio is favorable for investors as the company approaches its second-quarter earnings report. In light of these expectations, Citi has initiated a 30-day positive catalyst watch for Amer Sports.
Meanwhile, Morgan Stanley (NYSE:MS) lowered its price target for Amer Sports to $15, maintaining an Equalweight rating due to mixed financial indicators and a less than favorable Q2 forecast. Also, UBS reaffirmed its Buy rating with a steady price target of $23, citing Amer Sports' robust first-quarter sales and an increase in full-year 2024 earnings per share (EPS) guidance.
On the other hand, JPMorgan (NYSE:JPM) maintained its Overweight rating on the company with a steady price target of $19, highlighting the company's transformational steps, accelerated direct-to-consumer sales mix, and growing brand penetration in Greater China. Wells Fargo (NYSE:WFC) also held its position, keeping the stock's price target at $17, despite noting challenges such as flat North American sales and a second-quarter revenue guide falling short of initial projections.
InvestingPro Insights
As Amer Sports Inc. (NYSE:AS) gears up to release its second-quarter earnings, real-time data from InvestingPro offers a mixed financial landscape for the company. With a market capitalization of $5.42 billion, Amer Sports is navigating through challenging times, evidenced by a negative P/E ratio of -27.07, indicating that the company has not been profitable over the last twelve months. However, with a price/book ratio of 1.35, the company's stock may be seen as reasonably valued in terms of its net asset value.
An InvestingPro Tip highlights the expectation that net income is anticipated to grow this year, aligning with Citi's optimistic earnings outlook. This is particularly noteworthy given the company's significant presence in the Chinese market, which has been a source of concern for investors. Moreover, the recent price performance reflects a bearish sentiment, with the stock trading near its 52-week low and experiencing a notable decline over the last three months by approximately 27%. Despite this downturn, an InvestingPro Tip indicates that Amer Sports' liquid assets exceed its short-term obligations, which could provide some financial stability in uncertain economic times.
Investors looking for more detailed analysis and additional InvestingPro Tips can find them on the Amer Sports page at Investing.com. With 9 more tips available, these insights could be valuable for those considering an investment in Amer Sports as they evaluate the company's potential for a rebound and profitability in the current fiscal year.
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