Puma's Q2 2024 Performance: Challenges and Opportunities Ahead
Puma's shares took a hit last week following the release of their Q2 2024 results, which highlighted difficulties in the EEMEA wholesale market and increased finance expenses.
According to RBC Capital Markets analysts, these challenges "could have been better signposted and the Q2 revenue guidance needn't have been so high."
They continued, "We view this as a clearing event which could support near-term share price strength, noting no real change to earnings expectations and the setup still focused on hockey-stick Q4 2024 revenue acceleration at a depressed valuation."
Consensus expectations for fiscal year 2025 are modest, RBC notes, with projected growth of 8%, a 60 basis points margin expansion, and a 7.9% EBIT margin, slightly below Puma’s target of 8.0-8.5%.
If Q4 2024 achieves low double-digit growth, driven by wholesale order fulfillment and an easier revenue base in H1 2025, modest earnings upgrades for FY25 are possible.
"Coupled with depressed valuation across metrics, and recent sell-off, this could support a positive near-term share price outlook," analysts said.
However, the competitive landscape is expected to intensify in 2025, with Nike's (NKE) return and stronger momentum at Adidas, while margin targets depend on mixed visibility for gross margin evolution.
Citing higher finance expenses, RBC Capital Markets analysts reduced earnings per share (EPS) estimates for Puma and trimmed the price target to €42 from €47.
During the earnings call, Puma highlighted expectations for double-digit revenue growth in Q4 2024, driven by a strong wholesale order book, although IAS 29 benefits will impact reported rather than organic growth.
For Q3 2024, the company forecasts mid single-digit organic revenue growth, improved gross margins, but slightly lower EBIT compared to last year.
Moreover, Puma remains confident in achieving its FY25 margin target of 8.0-8.5%, with current trading in July meeting expectations and wholesale momentum accelerating.
Analysis: Breaking Down Puma's Q2 2024 Results
To put it simply, here's what this means for you:
- Puma's Recent Challenges: Puma faced some difficulties, especially in the EEMEA wholesale market, and had to deal with higher finance costs. This resulted in their shares dropping.
- Analyst Perspective: RBC Capital Markets says Puma could have better prepared investors for these issues. However, they believe this is just a temporary setback.
- Future Growth: Analysts expect modest growth for Puma in fiscal year 2025. If Puma performs well in the last quarter of 2024, it could lead to slight earnings improvements for 2025.
- Competitive Market: In 2025, Puma will face strong competition from Nike and Adidas, which could affect their profit margins.
- Price Target Adjustment: Due to higher finance expenses, analysts have lowered their earnings per share estimate and reduced Puma's price target from €47 to €42.
- Optimistic Outlook: Despite the challenges, Puma expects strong revenue growth in the last quarter of 2024 and remains confident in meeting its financial goals for 2025.
In summary, while Puma has encountered some hurdles, there is still potential for growth and recovery. Understanding these dynamics can help you make informed decisions about investing in Puma and navigating your financial future.