Coach Advances After Analyst Says Positive Turning Point Reached

The shares of Coach (COH) are rising in a down market after research firm William Blair upgraded the stock. The firm said it has greater confidence that the company’s business has reached a positive turning point.

NEW PRODUCT, FORMAT GAINING GROUND: After William Blair conducted a survey and carried out checks at stores, Amy Noblin, an analyst at the firm, believes that Coach’s new product and Modern Luxury store format are gaining ground with both new and existing customers. These trends should continue going forward, enabling the luxury accessories maker to beat operating margins and earnings expectations in 2017 and causing investors to become more upbeat about the stock, Noblin predicted. Meanwhile, by the fourth quarter of fiscal 2016, Coach should report the first year-over-year increase in its comparative sales since March 2013, predicted Noblin. Among the company’s near-term catalysts are greater penetration of its popular new product made by designer Stuart Vevers, an increase in the number of stores with the Modern Luxury format, and “sustained momentum” in the over $400 and under $300 categories, according to the analyst. Coach could generate earnings per share of $3.50-$4.00 by 2020, representing annualized growth of 15%-20%, estimated Noblin, who upgraded Coach to Outperform from Market Perform.

WHAT’S NOTABLE: Michael Kors (KORS) and Kate Spade (KATE) compete with Coach.

PRICE ACTION: In early trading, Coach climbed 2.5% to $41.31.