Core Insights - Kontoor Brands, Inc. (KTB) reported third-quarter 2024 results with revenues of $670.2 million and adjusted earnings of $1.37 per share, both exceeding Zacks Consensus Estimates [1][3][4] - The stock surged 11.9% on October 31 due to better-than-expected results and a positive earnings forecast for 2024 [1][2] - Management anticipates continued stabilization in the industry for the remainder of the year [1] Financial Performance - Adjusted earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.25, while GAAP earnings were $1.26, up from $1.05 year-over-year [3] - Net revenues increased by 2% from $654.5 million in the prior year quarter, exceeding the Zacks Consensus Estimate of $660 million [4] - Adjusted gross margin improved by 150 basis points year-over-year to 45% [4] Operating Expenses - Adjusted SG&A expenses rose by 5% year-over-year to $194.8 million due to investments in demand creation, product development, and distribution [5] - Adjusted operating income increased by 8% year-over-year to $107 million, with an adjusted operating margin of 15.9%, up 80 basis points [5] Segment Performance - U.S. revenues of $530 million improved by 5% year-over-year, driven by expanded distribution and market share gains [6] - International revenues fell by 5% to $141 million, primarily due to a 7% drop in international wholesale [7] - Wrangler brand revenues increased by 3% year-over-year to $464 million, while Lee brand revenues declined by 3% to $202 million [8][9] Future Guidance - Kontoor Brands updated its 2024 revenue forecast to $2.60 billion, with an expected 4% year-over-year increase in Q4 revenues [12] - Adjusted gross margin is anticipated to expand to 45.1%, reflecting a 260 basis point increase from the prior year [12] - Adjusted earnings per share are now expected to be $4.83, up from the previous forecast of $4.80, indicating a 9% improvement year-over-year [14]

Financial Data and Key Metrics Changes - The third quarter results exceeded expectations with global revenue increasing by 2% and adjusted earnings per share rising by 12% to $1.37 compared to the prior year [26][37][48] - Adjusted gross margin expanded by 150 basis points to 45% due to lower input costs and supply chain efficiencies [37][44] - Net debt decreased to $476 million with a net leverage ratio of 1.2 times, trending toward the low end of the targeted range [39][40] Business Line Data and Key Metrics Changes - Wrangler revenue grew by 4%, with a notable 10% growth in global direct-to-consumer (D2C) sales [10][28] - Lee's global revenue decreased by 3%, but the U.S. business showed signs of improvement with a 1% growth driven by a 2% increase in wholesale [31][32] - The female segment of both Wrangler and Lee experienced double-digit growth, indicating strong demand in this category [14][19] Market Data and Key Metrics Changes - In the U.S., Wrangler revenue increased by 5%, supported by a 10% increase in D2C and a 5% increase in wholesale [29][30] - Internationally, Wrangler's revenue decreased by 2%, with high single-digit growth in D2C offset by declines in wholesale [30] - Lee's international revenue decreased by 7%, with a 10% decline in Europe, while APAC saw a modest 1% increase [33][34] Company Strategy and Development Direction - The company is focused on product innovation and demand creation to drive market share gains and future growth [9][24] - Project Genius aims to deliver $100 million in combined gross margin and SG&A savings, enhancing operational efficiency and profitability [21][23][75] - The company plans to continue investing in demand creation, product development, and international expansion while maintaining a prudent approach to discretionary spending [53][95] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's momentum, anticipating a 4% revenue growth in the first half of 2025 [15][51] - The operating environment remains uncertain, with conservative inventory management among retail partners [43][64] - Management highlighted the importance of consumer preferences and strong POS performance as key drivers for future growth [60][64] Other Important Information - The company returned $168 million to shareholders year-to-date through share repurchases and dividends, with a recent 4% increase in the quarterly dividend [24][40] - The company launched a global Wrangler campaign, marking a significant marketing effort as a public company [100][102] Q&A Session Summary Question: What are the drivers of revenue growth for 2025? - Management highlighted strong consumer demand, ongoing market share gains, and new product launches as key drivers for the anticipated 4% growth in the first half of 2025 [58][60] Question: Can you elaborate on Project Genius and its impact? - Project Genius is focused on global supply chain transformation, back-end efficiencies, and commercial optimization, with expected savings of $100 million [67][75] Question: What improvements are being seen at Lee? - Leadership changes and a focus on female segments have led to significant early wins, with new product lines expected to drive further growth [78][80] Question: What is the outlook for product cost inflation? - Management expects a neutral product cost environment overall, with some modest inflation anticipated in the second half of 2025 [82][83] Question: How will the savings from Project Genius be allocated? - Savings will be gradually realized, with SG&A savings expected in the first half of 2025 and gross margin benefits in the second half [91][92]

Core Viewpoint - Kontoor Brands (KTB) reported quarterly earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.25 per share, and showing an increase from $1.22 per share a year ago, indicating a 9.60% earnings surprise [1][2] Financial Performance - The company achieved revenues of $670.19 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.50% and up from $654.54 million year-over-year [2] - Over the last four quarters, Kontoor has exceeded consensus EPS estimates three times and has topped consensus revenue estimates three times as well [2] Stock Performance - Kontoor shares have increased approximately 22.7% since the beginning of the year, compared to a 21.9% gain in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.41 on revenues of $712 million, and for the current fiscal year, it is $4.80 on revenues of $2.61 billion [7] Industry Outlook - The Textile - Apparel industry, to which Kontoor belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5][6]

Revenue Performance - Revenue for Q3 2024 was $670 million, a 2% increase compared to the prior year[1] - U.S. revenue was $530 million, a 5% increase driven by expanded distribution and market share gains[5] - International revenue decreased by 5% to $141 million, with a 7% decline in international wholesale[6] - Total net revenues for the three months ended September 2024 were $670,194, a 2% increase from $654,540 in 2023[40] - For the nine months ended September 2024, total net revenues were $1,908,294, a 2% decrease from $1,937,672 in 2023[40] - Wrangler segment revenues increased by 4% to $464,107, while Lee segment revenues decreased by 3% to $202,343[40] - U.S. wholesale revenues for Wrangler were $373,643, contributing significantly to total revenues[49] - U.S. wholesale revenues increased by 5% to $529,654 from $505,827 year-over-year[51] - International revenues decreased by 5% to $140,540 compared to $148,713 in the previous year[51] Profitability Metrics - Adjusted gross margin is expected to be 45.1%, an increase of 260 basis points compared to the prior year[2] - Adjusted EPS is now expected to be $4.83, representing a 9% increase compared to the prior year[2] - Adjusted operating income is expected to be $385 million, reflecting an 11% increase compared to the prior year[19] - Operating income increased by 15% to $98,321 in Q3 2024, compared to $85,482 in Q3 2023[37] - Total reportable segment profit rose by 18% to $121,108, with Wrangler profit increasing by 20% to $97,753[40] - Adjusted diluted earnings per share for the three months ended September 2024 was $1.26, compared to $1.05 in 2023[48] - Net income for the nine months ended September 2024 was $181,824, a 12% increase from $162,223 in the same period of 2023[39] - Net income for the trailing twelve months ended September 2024 was $250,595, an increase from $213,828 in the prior year[52] Cash Flow and Capital Management - Cash flow from operations is now expected to exceed $360 million, driven by accelerated earnings growth[22] - Cash provided by operating activities for the nine months ended September 2024 was $286,258, significantly up from $147,526 in 2023[39] - The Company repurchased $40 million of shares during Q3 2024[1] - The Company declared a quarterly cash dividend of $0.52 per share, a 4% increase compared to Q2 2024[14] - Cash and cash equivalents rose to $269,427 in September 2024, up from $77,828 in September 2023[38] - Total current assets increased to $1,066,227 as of September 2024, compared to $1,033,064 in September 2023[38] - Total liabilities stood at $1,296,196 as of September 2024, compared to $1,278,306 in September 2023[38] Expenses and Taxation - Selling, general and administrative expenses increased by 8% to $201,189 in Q3 2024 from $185,983 in Q3 2023[37] - Interest income surged by 208% to $2,965 in Q3 2024, compared to $964 in Q3 2023[37] - The company reported a 28% increase in income taxes for Q3 2024, totaling $16,225 compared to $12,697 in Q3 2023[37] - Interest expense increased by 7% to $11,178[40] - Restructuring and transformation costs for the trailing twelve months totaled $26.8 million, impacting net income with a corresponding tax effect of $6.6 million[54] - The effective income tax rate adjusted for restructuring costs was 15% for the trailing twelve months ended September 2024, down from 24% in the previous year[52] Investment and Returns - Adjusted return on invested capital (ROIC) improved to 29.7% in September 2024, up from 23.1% in September 2023[52] - The average invested capital for the trailing twelve months was $1,004,161, down from $1,078,393 in the previous year[52] - Other revenues surged by 90% to $3,744 from $1,974 year-over-year[51] - The gross margin for the three months ended September 2024 was 44.7%, up from 41.5% in 2023[48] - Corporate and other expenses increased by 31% to $26,307 for the three months ended September 2024[40]

Core Insights - The article discusses the impact of recent market volatility and inflation data on investment strategies, particularly focusing on dividend-paying stocks as a safer investment option during uncertain times [2][3][5][7]. Market Overview - The Nasdaq reached an all-time closing high recently, but market volatility has increased, with the Dow and S&P 500 ending a six-week winning streak [2]. - Recent inflation data showed a 0.2% increase in the consumer price index (CPI) for September, surpassing the expected 0.1% rise, while year-over-year CPI rose 2.4%, the smallest increase in over three and a half years [5][6]. Investment Strategy - In light of market conditions, investors are encouraged to consider dividend-paying stocks for steady income and capital preservation [4][8]. - Companies highlighted for their dividend increases include The Gorman-Rupp Company, Kontoor Brands, Inc., West Pharmaceutical Services, Inc., and Standex International Corp. [4][8]. Company Highlights - **The Gorman-Rupp Company (GRC)**: Announced a dividend of $0.19 per share with a yield of 1.93%. The company has increased its dividend six times in the past five years, with a payout ratio of 43% [9][10]. - **Kontoor Brands, Inc. (KTB)**: Declared a dividend of $0.52 per share, yielding 2.60%. The company has raised its dividend four times over the last five years, with a payout ratio of 42% [11]. - **West Pharmaceutical Services, Inc. (WST)**: Announced a dividend of $0.21 per share, yielding 0.26%. The company has increased its dividend five times in the past five years, with a payout ratio of 12% [12]. - **Standex International Corp. (SXI)**: Declared a dividend of $0.32 per share, yielding 0.68%. The company has raised its dividend six times over the last five years, with a payout ratio of 17% [13][14].

Group 1 - The article highlights the appeal of high-quality companies in the clothing and apparel market that are undervalued [1] - Crude Value Insights provides an investment service focused on oil and natural gas, emphasizing cash flow generation [1] - Subscribers benefit from a comprehensive stock model account, detailed cash flow analyses of exploration and production firms, and live sector discussions [1]

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TanyaJoy/iStock via Getty Images This article covers Kontoor Brands, Inc. (NYSE:KTB) Q2 2024 results and earnings call. It also reviews the company's valuation and rating. The results were mixed. Revenues were flat, which is typical for many apparel firms in the current cycle. The company improved its guidance, expecting a little better margins for the remainder of the year. On the other hand, Kontoor's results also hid some negative aspects, namely some weaknesses in wholesale and Asia. Further, with a pos ...