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Here's Why You Should Hold Carter's (CRI) Stock Right Now

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Carter’s Inc. (CRI - Free Report) has been gaining from a solid online show, improved price realization and gains from share repurchases. Robust demand in its wholesale and international businesses, as well as improved inventory, bodes well.

Driven by the above-mentioned factors, the company delivered an earnings and sales beat in first-quarter 2022.

As a result, shares of CRI have lost 14.5% in the past three months but came ahead of the industry’s decline of 16.6%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

An uptrend in the Zacks Consensus Estimate echoes the same sentiment. The Zacks Consensus Estimate for Carter’s 2022 sales and EPS suggests growth of 2.7% and 11.9%, respectively, from the year-ago period’s reported numbers.

The company remains focused on strengthening its e-commerce capabilities through investments to speed up deliveries. Its e-commerce business has been performing well, driven by expanded omnichannel facilities, including curbside pickup, same-day pickup, buy online and pickup at store, and ship from store, along with easy access to a broad array of online products when shopping in stores. Carter’s mobile app is also performing well.

The company repurchased shares worth $74.5 million in the first quarter. As of Apr 28, 2022, it had $945 million remaining under its existing share repurchase plan. Management also approved a quarterly dividend of 75 cents, payable Jun 10, of shareholders’ record as of May 31.

Management issued an encouraging view for 2022. The company anticipates sales growth of 2-3%, with improvements across all segments. Adjusted earnings are likely to rise 12-14% year over year, while adjusted operating income is expected to grow 4-6%.

However, earnings and revenues declined year over year in first-quarter 2022. Drab retail sales and adverse impacts of store closures during the Easter holiday hurt quarterly growth. Also, higher ocean freight and transportation costs dented the quarterly margins, which, in turn, hurt the bottom line.

Management noted that higher freight charges and supply-chain issues would likely remain deterrents in 2022. For second-quarter 2022, Carter’s envisions adjusted earnings of $1.60-$1.80, suggesting a decline from $1.67 reported in the prior-year quarter. Adjusted operating income is expected to increase $95-$100 million, whereas it reported $107.6 million in the prior-year quarter. The view includes the impacts of supply-chain headwinds, rising labor costs, marketing investments, and distribution and freight costs.

Wrapping Up

Robust demand, solid online show and improved price realization are likely to aid this Zacks Rank #3 (Hold) stock in the near term despite supply-chain headwinds and rising freight costs. Also, a long-term earnings growth rate of 6.5% reflects its inherent strength.

Stocks to Consider

Some better-ranked stocks from the same industry are Delta Apparel (DLA - Free Report) , Oxford Industries (OXM - Free Report) and GIII Apparel Group (GIII - Free Report) .

Oxford Industries is an apparel company, which designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. It currently flaunts a Zacks Rank #1 (Strong Buy). OXM has a trailing four-quarter earnings surprise of 99.7%, on average.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 10.9% and 7.1%, respectively, from the year-ago period's reported numbers.

Delta Apparel, the manufacturer of knitwear products, currently sports a Zacks Rank #1. DLA has a trailing four-quarter earnings surprise of 95.5%, on average.

The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period's reported numbers.

GIII Apparel, the manufacturer, designer and distributor of apparel and accessories, presently has a Zacks Rank #2 (Buy). GII has a trailing four-quarter earnings surprise of 160.6%, on average.

The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 8.7% and 5.2% from the year-ago period’s reported numbers, respectively.