We Think Carter's Has Value in its Pockets
Despite near-term headwinds, we think Carter's long-term prospects are bright.
In our view, Carter's (CRI) second-quarter miss, which was weighed down by several one-time factors, has provided investors with an attractive entry point. While we agree that rising input costs in the apparel industry will have a negative impact on near-term results, we believe Carter's should be able to weather these headwinds better than its peers, given its market-leading position in the space. Additionally, we are optimistic about Carter's long-term prospects, given its well-established relationship with retailers in the wholesale channel, a growing presence of its retail stores, and improving trends in the OshKosh brand. Therefore, we think an attractive buying opportunity will arise if Carter's stock falls below our Consider Buy price of $23.80, which implies forward fiscal-year price/earnings of 10 times, enterprise value/EBITDA of 5.2 times, and a free cash flow yield of 8.6%.
We view weakness in Carter's second-quarter results as a one-time phenomenon.
Zoe Tan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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