Bank of America says this shoe stock is an inflation winner and you should buy it before earnings

Published Thu, May 2 20248:38 AM EDTUpdated Thu, May 2 20249:00 AM EDT

Footwear company Crocs has strong momentum, making it a solid play for investors ahead of earnings out next week, according to Bank of America. Analyst Christopher Nardone reiterated his buy rating and $150 price target, saying the stock is a winner in a "price-sensitive consumer environment." That suggests shares stand to gain 21.4% from Thursday's closing price. The stock, which was once a "Covid winner," has gained more than 32% year to date. It's set to report on Tuesday before the opening bell. "We think the upper end of sales/EPS guidance is achievable, with potential for a beat driven by momentum in the Crocs business," Nardone wrote in a Thursday note. "We think the value proposition of both brands (particularly Crocs) and international white space will remain key competitive advantages in a softer U.S. consumer backdrop." Nardone expects Crocs' international business, which accounts for 40% of its total sales, to be "the driver of outsized growth" for the quarter and full year. He expects those sales to be fueled by growth in Asia, particularly in the China and India markets. He forecasted total Crocs sales growth of 8% in the first quarter and 6% in the full year. He also said he expects international sales to rise 11% this year, which he said may be conservative given the growth seen in the last two years in the segment. The analyst also noted a potential turnaround story for Crocs' casual footwear business Heydude, which has concerned investors after its soft performance in the third and fourth quarters of last year. He expects Terence Reilly's appointment as the president of the brand, which became effective April 29, will set up "well over the medium term" for Heydude given the executive's prior experience leading marketing at Crocs and as the former president of the drinkware brand Stanley. "Nearer term, we think the market will be most focused on signs of improvement in both DTC and margins," for Heydude, Nardone said. "We think a cut to guidance out of the gate would be disappointing and could curtail credibility despite HD representing only 18% of combined brand EBIT." Another good sign for Crocs' upcoming earnings is the recent and fairly positive wholesale results from two peer footwear names, Skechers and Steve Madden, Nardone added.