Yeti Holdings Raises Guidance After Topping Q1 Expectations

Shares of outdoor gear maker Yeti Holdings NYSE: YETI vaulted nearly 5% higher Thursday following a better-than-expected first-quarter earnings report. 

The company makes drink containers, coolers, blankets, camping chairs, apparel, pet gear and other items that caught on during the pandemic as people spent more time enjoying the great outdoors. 

Earnings came in at $0.38 per share, up 245% from a year ago, handily topping views of $0.21 per share. Revenue was $247.6 million, up 42%, also ahead of forecasts, which called for $220.3 million.

In its report, Yeti cited several key metrics driving growth:

• Direct-to-consumer, or online sales, grew 59% to $126.8 million, up from $79.6 million in the year-ago quarter. The company said drinkware and coolers were especially strong.  
• Wholesale channel sales increased 27% to $120.8 million, up from $94.8 million a year ago. Here, too, coolers and drinkware were big sellers. 
• Drinkware net sales came in at $148.9 million, a year-over-year gain of 32%. The company said new colors and sizes, as well as customization, were popular in the quarter.
• Coolers and equipment net sales grew to $93.5 million, up 57% from a year ago.  

In the statement accompanying the earnings report, CEO Matt Reintjes said, "After the strong start to 2021, we are raising both our full-year net sales and earnings per share outlooks to 20% and 22% growth, respectively, versus the prior year.”

That’s higher than analysts had forecast. 

Building Upon 2020 Success

He added that momentum from 2020 carried over into 2021, “as consumers continue to participate in the significant growth in active, outdoor lifestyles. We believe we are well-positioned to generate and build upon this customer enthusiasm for the brand now and into the future.”

In the earnings call, the company said it expects the second quarter to be stronger than the first, which makes intuitive sense. With warm weather in the spring and early summer, more people are ready to get outdoors and purchase gear for their new adventures. 

Yeti went public in October 2018, so it’s still a new stock, in the zone when it’s poised for big potential gains. Shares are up 197.81% over the past year, and 18.91% year-to-date. The stock consolidated between mid-January and mid-April, clearing a buy point above $80.89 in heavy volume on April 12. 

The stock rallied to an all-time high of $90.65 on Monday, before reversing lower. The broader market attempted a rally the same day, but finished the session lower. It’s not uncommon to see any given stock trending in the same direction as major indexes. 

Earnings And Revenue Grow At Fast Clip

Yeti has all the fundamental characteristics you want to see in a growth company. Annual earnings growth accelerated over the past three years. On a quarterly basis, earnings grew at double- or triple-digit rates in the past eight quarters. Revenue grew at double-digit rates in seven of the past eight quarters, the sole exception being the quarter ended in June 2020, when sales were up 7%.

Full-year revenue also rose in 2019 and 2020. Other metrics, such as return on assets and return on equity have also been on the rise, and at 22.8% and 75.92% respectively, remain strong.

The company’s price-to-earnings ratio of 44 may give some investors pause, as it could signal a stock priced to perfection. However, many growth stocks have sky-high P/E ratios, and still go on to notch more gains. Once a stock is more mature, you’ll see lower P/Es. At this juncture, this is not something that should stop investors who may want to take a position in the stock.

However, broader market weakness and choppiness could be a concern. Strong price action today in Yeti may make it a current buy candidate, but wider market conditions warrant having stops in place, or a strong stomach to sit through another potential correction.