Piper Jaffray Maintained Its Rating on Coach

Price movements

Coach (COH) has a market cap of $10.3 billion. It rose 2.6% to close at $35.94 per share on September 19, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.5%, -8.1%, and 12.7%, respectively, on the same day.

COH is trading 5.1% below its 20-day moving average, 10.1% below its 50-day moving average, and 3.6% below its 200-day moving average.

Piper Jaffray Maintained Its Rating on Coach

Related ETF and peers

The ALPS Sector Dividend Dogs ETF (SDOG) invests 2.0% of its holdings in Coach. The ETF tracks an equal-weighted index of the five highest-yielding S&P 500 securities in each sector. The YTD price movement of SDOG was 17.6% on September 19.

The market caps of Coach’s competitors are as follows:

  • Estee Lauder Companies (EL) — $32.0 billion
  • Ralph Lauren (RL) — $8.2 billion
  • Michael Kors Holdings (KORS) — $8.4 billion

Coach’s rating

Piper Jaffray has maintained Coach’s rating as “overweight” with a price target at $46 per share.

TheStreet reported that according to Barron’s, Piper Jaffray said, “We believe product initiatives are aiding comp growth and supporting new and lapsed consumers to the Coach brand.”

Barron’s also said, “[Piper Jaffray] added that the stock is moving to ‘growth’ from ‘recovery.’”

Performance of Coach in fiscals 4Q16 and 2016

Coach reported fiscal 4Q16 net sales of $1.2 billion, a rise of 20.0% compared to its net sales of $1.0 billion in fiscal 4Q15. The company’s gross profit margin fell 1.0% in fiscal 4Q16 compared to the prior year’s period.

Coach’s net income and EPS (earnings per share) rose to $81.5 million and $0.29, respectively, in fiscal 4Q16, compared to $11.7 million and $0.04, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.45 in fiscal 4Q16, a rise of 45.2% compared to fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, COH reported net sales of $4.5 billion, a rise of 7.1% YoY (year-over-year). The company’s gross profit margin fell 0.23%, and its operating income rose 5.7% in fiscal 2016.

Its net income and EPS rose to $460.5 million and $1.65, respectively, in fiscal 2016 compared to $402.4 million and $1.45, respectively, in fiscal 2015.

Coach’s cash and cash equivalents and its short-term investments and inventories fell 13.3% and 5.3%, respectively, in fiscal 2016. Its current ratio and debt-to-equity ratio fell to 2.6x and 0.82x, respectively, in fiscal 2016 compared to 3.0x and 0.87x, respectively, in fiscal 2015.

Projections

The company has made the following projections for fiscal 2017:

  • revenue growth in the low to mid-single digits, including foreign currency benefits of ~1.0%–1.5%
  • operating margin in the range of 18.5%–19.0%
  • interest expense of ~$25 million
  • tax rate of ~28%
  • net income growth in the double digits
  • EPS growth in the double digits

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