On Friday, Telsey Advisory Group adjusted its outlook on Guess (NYSE: NYSE:GES) shares by reducing the price target to $26 from the previous $30 while retaining a Market Perform rating on the stock.
The revision follows Guess's announcement of a solid earnings per share (EPS) beat for the first quarter, bolstered by strong top-line revenue and gross margin performance.
Additionally, the incorporation of the newly acquired rag & bone business contributed 4% to the constant currency sales growth for the quarter.
Each of Guess's business segments experienced revenue growth during the quarter. In response to the company's financial performance, Guess has increased the lower end of its operating margin and EPS guidance ranges for the year.
Despite these positive developments, the firm noted that retail traffic challenges in the Americas have led to a decrease in the annual sales growth target.
Furthermore, operating margins are expected to face continued pressure in the near term due to elevated expenses, partly arising from the acquisition and the launch of the new Guess Jeans brand.
The Telsey Advisory Group's revised price target of $26 is based on an 8.2 times multiple applied to their two-year forward EPS estimate of $3.17. This valuation is consistent with the current near-term market multiple of 8.1 times.
The decision to maintain the Market Perform rating reflects the balance between the first quarter's strong performance and the headwinds anticipated in the Americas, along with the impact of higher costs on the company's operating margin.
InvestingPro Insights
In light of the recent analysis by Telsey Advisory Group, a closer look at Guess (NYSE: GES) through InvestingPro's lens reveals some interesting metrics and tips that align with the article's discussion. With a market capitalization of $1.25 billion, Guess is trading at a P/E ratio of 6.4, which is notably low, especially considering the near-term earnings growth. This aligns with the InvestingPro Tip that Guess is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock could be undervalued.
Additionally, Guess has shown a commitment to returning value to shareholders, as evidenced by the 5.13% dividend yield and the company's track record of raising its dividend for 4 consecutive years. These figures support the InvestingPro Tip highlighting that Guess pays a significant dividend to shareholders.
For readers interested in a deeper analysis, InvestingPro offers additional insights on Guess, including 11 more InvestingPro Tips that could further inform investment decisions. To explore these tips and gain a comprehensive understanding of Guess's financial health and future prospects, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.