In an era where statistics and forecasts dominate investment decisions, Citi’s recent reaffirmation of a Sell rating on Hennes & Mauritz AB (HMB:SS) (OTC: HNNMY) with a SEK143.00 price target has raised eyebrows in the financial world. The bank’s unwavering position comes after a close examination of the fashion retailer, resulting in the preservation of the third quarter and full year 2024 estimates for H&M.
What sets Citi’s analysis apart is its projection for modest constant currency sales growth of +1% in the third quarter of 2024 (3Q24e), a striking contrast to the consensus expectation of +3.2%. The bank takes into account the -6% constant currency sales decline in June, a month that traditionally contributes around 40% of third-quarter sales, despite anticipating easier comparisons in July and August.
Key Points from Citi’s Analysis:
– Forecasted earnings before interest and taxes (EBIT) for the third quarter: SEK 4,168 million
– Forecasted EBIT for the full year 2024: SEK 18,325 million
– Estimated EBIT margin for the third quarter: 6.9%, full year: 7.7%
– Consensus expects a -24% EBIT for the third quarter and a -10% EBIT for the full year
– Concerns regarding optimistic consensus estimates for sales, general, and administrative (SG&A) leverage
Interestingly, Citi’s projections fall well below consensus figures, emphasizing the bank’s cautious outlook towards H&M’s financial performance. The Sell rating and price target alignment signify Citi’s belief in the retailer’s stock potentially underperforming in the market.
Insights from InvestingPro:
– H&M has a market capitalization of $25.8 billion with moderate debt levels
– P/E ratio at 23.92, considered low relative to earnings growth
– Gross profit margin of 53.16%, operating income margin of 7.73%
– Positive EBITDA growth of 83.86%
– Return on assets of 6.14%
– Dividend yield of 3.96% with a noteworthy growth of 48.61% from the last twelve months as of Q2 2024
For a deep dive into H&M’s financial standing, InvestingPro offers 5 additional tips, including analysis on dividend yield and price performance across different time frames. This detailed examination caters to investors seeking comprehensive insights to make informed decisions. Find out more at InvestingPro for a holistic view of H&M’s investment potential.
In the fast-paced realm of investing, prudent decisions guided by thorough analysis are crucial for success. With Citi’s cautious outlook and InvestingPro’s detailed insights, investors are equipped to navigate the turbulent waters of financial markets with confidence and knowledge. Stay informed, stay ahead.
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