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Coach Beats on Earnings, Misses on Revenue in 4Q16

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Snapshot of the series

Coach (COH) reported its fourth quarter and fiscal 2016 results on August 9, 2016. The company reported earnings of $0.45 per share, beating Wall Street analysts’ average estimate of $0.41 or 10%. The adjusted EPS (earnings per share) rose 47% year-over-year on a top line increase of 15%—compared to the same quarter last year. However, the company missed Wall Street analysts’ average revenue estimates by $9 million and reported total sales of $1.15 billion.

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About Coach

Established in 1941, Coach is a leading luxury fashion and accessory brand. The company’s products target the affordable luxury business and include handbags, watches, footwear, and apparel among other things.

Coach reports revenues according to two major segments—Coach Brand and Stuart Weitzman Brand. The company acquired Stuart Weitzman, a leading American luxury designer footwear brand, in January 2015. The brand contributed 7.7% towards Coach’s total revenue in fiscal 2016.

The Coach brand’s business can be divided into the North America and International segments. North American revenues include sales from the US and Canada, while sales from the International segment include those derived from overseas markets—notably Japan and China.

Valuations update and stock recommendation

Currently, Coach is trading at a one-year forward price-to-earnings ratio of 18.4x—compared to 10.6x, 20.1x, and 24.5x for Michael Kors (KORS), Ralph Lauren (RL), and Kate Spade (KATE) as of August 11, 2016.

The mean 12-month price target by 36 analysts covering Coach is $44.47. This suggests that the stock could gain about 12% over the next year.

It’s important to note that 20 of the 34 analysts have recommended a “buy” on the stock, 14 have recommended a “hold,” and two gave a “sell” rating.

Investors looking to invest in Coach through ETFs can choose to invest in the iShares Morningstar Mid-Cap Value ETF (JKI). Coach has a weight of ~1.17%, respectively, in JKI.

What’s in this series?

This series will provide an overview of Coach’s 4Q16 results. We’ll discuss the company’s financial performance in 4Q16, analyze the key revenue drivers, take a look at the company’s guidance, and discuss its current valuation compared to its peers.

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