On Thursday, Telsey Advisory Group adjusted its price target for Leslie's (NASDAQ: LESL) shares, a leading pool supplies company, to $4.00 from the previous $6.00, while maintaining a Market Perform rating on the stock. This revision follows Leslie's announcement of a weaker-than-expected earnings forecast for the third quarter of fiscal year 2024 and a lowered outlook for the fourth quarter.
Leslie's reported that sales trends in the third quarter were negatively impacted by the continuation of unfavorable weather conditions, including a cold and wet spring that extended into April and May. These conditions affected both seasonal and non-seasonal markets.
Additionally, the company faced challenges due to a difficult macroeconomic environment, with high-interest rates and rising inflation putting pressure on consumer spending, particularly in the area of large-ticket discretionary items.
Despite a slight improvement in June, with sales down only 2%, Leslie's does not anticipate further recovery in the fourth quarter. The revised guidance for the year suggests that the company expects the fourth quarter's performance to mirror that of the third quarter.
The firm's analyst cited these factors as reasons for the revised price target, applying an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of approximately 11 times to an adjusted fiscal year 2025 EBITDA estimate of $139 million. The analyst's commentary reflected a cautious stance, indicating no immediate signs of a return to positive sales growth for Leslie's in the near term.
In other recent news, Leslie's Inc. has been facing substantial changes. The company's stock rating was downgraded by Stifel from "Hold" to "Sell" following a significant reduction in its FY24 EBITDA forecast.
Leslie's second-quarter earnings report also showed a decline in sales, with total sales standing at $189 million, marking an 11% decrease from the previous year, mainly due to adverse weather conditions and a normalization of consumer spending patterns.
In the midst of these financial challenges, the company has undergone a leadership shift with the recent appointment of Maile (Clark) Naylor to its Board of Directors, following the resignation of Eric Kufel. Naylor is expected to bring valuable insights to the company, thanks to her extensive experience and background as an analyst and investor.
As part of Leslie's strategic growth initiatives, the company plans to open 15 new stores and convert 6 residential stores to PRO format in fiscal 2024. Despite the current headwinds, Leslie's remains focused on its long-term growth and profitability, implementing strategic initiatives to bolster future growth and reduce debt. These recent developments reflect Leslie's commitment to adapt and grow in the ever-evolving pool supply industry.
InvestingPro Insights
Leslie's (NASDAQ: LESL) recent performance and market assessment reveal a blend of challenges and potential upsides. According to the latest InvestingPro data, Leslie's has a market capitalization of $753.75 million and is trading at a high earnings multiple with a P/E ratio of 50.95. This high multiple suggests that investors are anticipating higher earnings growth in the future, despite the company's recent downward revision in earnings forecast.
InvestingPro Tips highlight that Leslie's stock has experienced a significant return over the last week, with a 9.09% price total return, indicating a potential rebound in investor sentiment. Additionally, the company's liquid assets surpass short-term obligations, which could provide some financial stability in the face of macroeconomic pressures. Analysts predict Leslie's will be profitable this year, a positive sign amidst the tough market conditions.
For investors looking for more in-depth analysis and additional InvestingPro Tips, you can find a total of 8 tips to guide your investment decisions for Leslie's at Investing.com/pro/LESL. Moreover, to access these insights and more, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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