Mizuho Slashes Leslie’s Price Target to $1, Shares Drops 4%

• Leslie's, Inc. (NASDAQ:LESL) reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11, marking a significant downturn in performance.
• Despite the earnings miss, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million but still reflecting challenges in maintaining growth.
• The company's financial metrics, including a negative price-to-earnings (P/E) ratio of -27.76 and a debt-to-equity ratio of -1.58, highlight ongoing financial challenges.

Leslie's, Inc. (NASDAQ:LESL) is a prominent player in the U.S. pool and spa care industry, known for its direct-to-consumer approach. The company offers a wide range of products and services, catering to pool owners and professionals. Despite its strong market presence, LESL faces competition from other consumer product companies within the Zacks Consumer Products - Staples industry.

On November 25, 2024, LESL reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11. This represents a significant earnings miss, as highlighted by Zacks, with a negative surprise of 81.82%. The company had previously reported a positive earnings surprise of 6.25% in the prior quarter, indicating a downturn in performance.

Despite the earnings shortfall, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million. However, this revenue figure still fell short of the Zacks Consensus Estimate by 1.81%. Compared to the same period last year, revenue decreased from $432.37 million, reflecting challenges in maintaining growth.

The company's financial metrics reveal its current struggles. LESL has a negative price-to-earnings (P/E) ratio of -27.76, indicating ongoing losses. The price-to-sales ratio of 0.49 suggests the stock is valued at less than half of its sales per share. Additionally, the enterprise value to sales ratio is 0.62, reflecting the company's total valuation relative to its sales.

LESL's liquidity position appears stable, with a current ratio of 1.71, indicating the ability to cover short-term obligations. However, the debt-to-equity ratio of -1.58 suggests more liabilities than equity, highlighting financial challenges. Despite these hurdles, CEO Jason McDonell noted strong performance in the Pro segment, although store traffic and larger-ticket categories remain soft.

• Leslie's, Inc. (NASDAQ:LESL) reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11, marking a significant downturn in performance.
• Despite the earnings miss, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million but still reflecting challenges in maintaining growth.
• The company's financial metrics, including a negative price-to-earnings (P/E) ratio of -27.76 and a debt-to-equity ratio of -1.58, highlight ongoing financial challenges.

Leslie's, Inc. (NASDAQ:LESL) is a prominent player in the U.S. pool and spa care industry, known for its direct-to-consumer approach. The company offers a wide range of products and services, catering to pool owners and professionals. Despite its strong market presence, LESL faces competition from other consumer product companies within the Zacks Consumer Products - Staples industry.

On November 25, 2024, LESL reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11. This represents a significant earnings miss, as highlighted by Zacks, with a negative surprise of 81.82%. The company had previously reported a positive earnings surprise of 6.25% in the prior quarter, indicating a downturn in performance.

Despite the earnings shortfall, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million. However, this revenue figure still fell short of the Zacks Consensus Estimate by 1.81%. Compared to the same period last year, revenue decreased from $432.37 million, reflecting challenges in maintaining growth.

The company's financial metrics reveal its current struggles. LESL has a negative price-to-earnings (P/E) ratio of -27.76, indicating ongoing losses. The price-to-sales ratio of 0.49 suggests the stock is valued at less than half of its sales per share. Additionally, the enterprise value to sales ratio is 0.62, reflecting the company's total valuation relative to its sales.

LESL's liquidity position appears stable, with a current ratio of 1.71, indicating the ability to cover short-term obligations. However, the debt-to-equity ratio of -1.58 suggests more liabilities than equity, highlighting financial challenges. Despite these hurdles, CEO Jason McDonell noted strong performance in the Pro segment, although store traffic and larger-ticket categories remain soft.

Loop Capital analysts reduced the price target on Leslie's (NASDAQ:LESL) to $3 from $6 while keeping a Hold rating on the stock.

The analysts remarked that Leslie's issued a negative pre-announcement ahead of its third-quarter 2024 results, primarily attributing the downturn to poor weather and ongoing softness in big-ticket repairs and replacements (R&R) sales. As a result, shares plunged more than 30% yesterday.

The analysts noted that Pool Corporation had similarly pre-announced negative results about three weeks prior, and channel checks earlier in the quarter had indicated ongoing challenges, making it reasonable to expect a pre-announcement from Leslie's as well. However, the extent of the guidance reduction for both the quarter and the full year was more severe than anticipated.

The company's implied fourth-quarter guidance suggests that sales softness will continue, regardless of weather conditions, and there will be limited gross margin recovery despite the favorable comparison to the previous year's inventory de-stocking period. The analysts pointed out that visibility into a return to normal growth remains limited due to persistent underlying challenges following the pandemic's substantial pull-forward effects. Additionally, Leslie's faces an unusually high leverage ratio.

Loop Capital analysts reduced the price target on Leslie's (NASDAQ:LESL) to $3 from $6 while keeping a Hold rating on the stock.

The analysts remarked that Leslie's issued a negative pre-announcement ahead of its third-quarter 2024 results, primarily attributing the downturn to poor weather and ongoing softness in big-ticket repairs and replacements (R&R) sales. As a result, shares plunged more than 30% yesterday.

The analysts noted that Pool Corporation had similarly pre-announced negative results about three weeks prior, and channel checks earlier in the quarter had indicated ongoing challenges, making it reasonable to expect a pre-announcement from Leslie's as well. However, the extent of the guidance reduction for both the quarter and the full year was more severe than anticipated.

The company's implied fourth-quarter guidance suggests that sales softness will continue, regardless of weather conditions, and there will be limited gross margin recovery despite the favorable comparison to the previous year's inventory de-stocking period. The analysts pointed out that visibility into a return to normal growth remains limited due to persistent underlying challenges following the pandemic's substantial pull-forward effects. Additionally, Leslie's faces an unusually high leverage ratio.

Berenberg Bank upgraded Leslie's, Inc. (NASDAQ:LESL) to buy from hold and increased its price target on the company’s shares to $30 from $28, as it believes the recent pullback in the company’s stock price since early May presents a strong buying opportunity.

According to the analysts at Berenberg Bank, margin pressures and a recently announced secondary offering boosted the investors’ concerns, but they think industry tailwinds and the positive effect of the company’s growth strategies will allow it to strongly take advantage of industry tailwinds. While they previously rated the company a Hold as they were having difficulties to find valuation upside, they now think the shares offer an attractive entry point.

Berenberg Bank upgraded Leslie's, Inc. (NASDAQ:LESL) to buy from hold and increased its price target on the company’s shares to $30 from $28, as it believes the recent pullback in the company’s stock price since early May presents a strong buying opportunity.

According to the analysts at Berenberg Bank, margin pressures and a recently announced secondary offering boosted the investors’ concerns, but they think industry tailwinds and the positive effect of the company’s growth strategies will allow it to strongly take advantage of industry tailwinds. While they previously rated the company a Hold as they were having difficulties to find valuation upside, they now think the shares offer an attractive entry point.