On Thursday, UBS adjusted its stance on Kering (LON:0IIH) (EPA:PRTP) SA (KER:FP) (OTC: PPRUY), downgrading the stock from Buy to Neutral and decreasing its price target from €410.00 to €300.00.
The revision followed a reassessment of the time and costs associated with Gucci's new strategy implementation and the impact of a slowdown in sector trends on Kering's brands.
The firm acknowledged that while Kering is taking appropriate measures to revitalize its brands, there is now reduced clarity on when these efforts will start to yield positive results.
This uncertainty, coupled with weaker than anticipated earnings momentum for Gucci, which accounts for approximately 70% of Kering's EBIT, prompted the reassessment.
The reassessment was also influenced by the first-half results, which led to a significant reduction in earnings per share (EPS) forecasts for the luxury goods company. UBS revised its EPS projections downward by 17% for FY24, and by 26% for both FY25 and FY26.
Gucci's performance has been under scrutiny, as the brand has experienced a period of underperformance. The downgrade reflects the challenges Kering faces in repositioning Gucci and its other brands amidst a broader deceleration in the luxury sector.
The new price target of €300.00, down from the previous target of €410.00, takes into account the revised earnings expectations and the anticipated time it may take for Kering's strategies to materialize into financial success. The downgrade to Neutral indicates a more cautious outlook on the stock's potential performance in the near term.
InvestingPro Insights
In light of UBS's recent downgrade of Kering SA (OTC: PPRUY), current data from InvestingPro provides additional context for investors considering the stock. Kering's market capitalization stands at a robust $37.22 billion, and the company boasts a high gross profit margin of 76.29% for the last twelve months as of Q4 2023. This impressive margin underscores Kering's ability to maintain profitability despite a challenging market environment.
Investors might also be interested in Kering's long-standing history of dividend payments, with the company having maintained these payouts for 33 consecutive years, showcasing its commitment to shareholder returns. The dividend yield as of 2024 is attractive at 5.22%, which, coupled with a dividend growth of 52.78% over the last twelve months, might appeal to income-focused investors. Furthermore, despite a predicted drop in net income this year, analysts remain optimistic about the company's profitability.
For those looking to delve deeper into Kering's financials and future prospects, additional InvestingPro Tips reveal that Kering is a prominent player in the Textiles, Apparel & Luxury Goods industry and is trading near its 52-week low, potentially offering a favorable entry point for long-term investors. To access more exclusive insights, investors can visit InvestingPro and use coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 7 additional InvestingPro Tips available, informed investment decisions are just a click away.
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