Kontoor Brands, Inc. (NYSE: KTB) has declared a regular quarterly cash dividend of $0.50 per share of its common stock. The dividend will be payable on March 18, 2024, to shareholders of record at the close of business on March 8, 2024. Kontoor Brands is a global lifestyle apparel company, with a portfolio led by two iconic consumer brands, Wrangler® and Lee®.
In a statement regarding the dividend announcement, Kontoor Brands' management highlighted the company's commitment to delivering value to its shareholders. "We are pleased to declare a quarterly cash dividend, reflecting our confidence in the company's financial strength and our continued ability to generate strong cash flow," said a company spokesperson.
The company's shares have experienced a slight movement, decreasing by -0.2%, and are currently trading at a price of $62.66.
Kontoor Brands, Inc.'s full 8-K submission is available here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $2,764 | $2,549 | n/a | $2,098 | $2,476 | $193 |
| Operating Margins | 12.0% | 7.0% | n/a | 6.0% | 11.0% | 24.0% |
| Net Margins | 10.0% | 4.0% | n/a | 3.0% | 8.0% | 10.0% |
| Net Income (M) | $263 | $97 | n/a | $68 | $195 | $18 |
| Net Interest Expense (M) | $6 | $36 | n/a | $50 | $39 | $1 |
| Depreciation & Amort. (M) | $24 | $31 | n/a | $34 | $37 | $37 |
| Diluted Shares (M) | 57 | 57 | 58 | 59 | 57 | 57 |
| Earnings Per Share | $4.64 | $1.69 | n/a | $1.17 | $3.31 | $0.46 |
| Avg. Price | n/a | $29.84 | $24.88 | $49.47 | $40.18 | $62.81 |
| Free Cash Flow (M) | -$117 | $755 | n/a | $224 | $273 | $192 |
| CAPEX (M) | $21 | $23 | n/a | $18 | $11 | $27 |
| Total Debt (M) | n/a | $913 | $1,037 | $817 | $793 | $786 |
| Current Ratio | 3.15 | 2.32 | 2.21 | 1.96 | 2.23 | 2.65 |
Based on the presented growth and value factors, the current market price of Kontoor Brands at $62.66 seems overvalued.
The growth factors present a mixed picture. While Kontoor Brands has been increasing its capital expenditures and the operating margins are in line with the industry average, the company is facing significant challenges. Revenues are declining at a substantial rate of -40.8%, and earnings per share have also been declining over the last 5 years at an alarming rate of -37.0%. Additionally, the PEG ratio appears inflated, indicating a potential overvaluation relative to the company's growth prospects.
The value factors also contribute to the overvaluation thesis. Kontoor Brands' total liabilities far exceed its current assets, resulting in a highly leveraged balance sheet, with a current Net Debt / EBITDA ratio of 8.62. The company's free cash flows have been on a negative trend over the last 5 years, with a compounded average growth rate of -9.7%, indicating potential financial strain. Moreover, the disproportionate representation of inventories in current assets raises concerns about the company's ability to effectively manage its working capital.
In conclusion, while Kontoor Brands has shown some positive signs in terms of capital expenditures and operating margins, the overall trend of declining revenues, earnings, and deteriorating financial position suggests that the stock may be overvalued at its current price. Investors should exercise caution and thoroughly assess the company's growth prospects and financial health before considering an investment in Kontoor Brands.
