Stifel reiterates Buy rating on Levi Strauss stock ahead of earnings

Stifel has reiterated its Buy rating and $20 price target for Levi Strauss & Co. (LEVI), citing potential for a modest revenue and earnings beat driven by the company's category relevance, traction with younger consumers, and a structural shift towards higher-value products. This positive outlook is further bolstered by Levi's strategic divestiture of the Dockers brand for up to $391 million, a move expected to streamline operations, enhance its direct-to-consumer strategy, and fund share repurchases that could boost future earnings per share, despite some offsetting tariff impacts.

Analysis

Levi Strauss & Co. (LEVI) has received a reaffirmed Buy rating and a $20.00 price target from Stifel, signaling confidence ahead of its upcoming earnings report. The firm anticipates a modest beat on consensus estimates of $1.37 billion in revenue and $0.13 EPS, citing the brand's relevance and successful traction with younger demographics at higher average selling prices. This operational strength is complemented by a significant strategic move: the divestiture of the Dockers brand for up to $391 million. This sale is viewed as a positive step by analysts, including UBS, to streamline operations, sharpen focus on the core Levi's brand, and enhance its direct-to-consumer strategy. A portion of the proceeds, approximately $100 million, is allocated for share repurchases, which Stifel estimates will add $0.01 to FY25 EPS and $0.02 to FY26 EPS. While the long-term outlook projects mid-single-digit revenue growth and low-double-digit EPS growth, investors should note offsetting factors. Favorable foreign exchange rates are expected to add approximately $115 million to FY25 revenue, but this is tempered by an estimated $0.05 per share negative impact from tariffs, even after mitigation efforts. Stifel's $20 price target is based on a 13.3x multiple of its fiscal 2026 earnings estimate of $1.50 per share.

Key Decisions for Investors

• Investors should view the sale of the Dockers brand as a key strategic catalyst, as it sharpens the company's focus on its more profitable core business and funds shareholder-friendly buybacks.
• Ahead of the earnings release, focus on whether the company confirms the anticipated revenue strength and provides any updates to its full-year guidance, particularly regarding the quantified impacts of FX tailwinds and tariff headwinds.
• Given the positive analyst sentiment and strategic initiatives, investors could consider the stock's current valuation, noting it trades below some fair value estimates with analyst price targets ranging from $15 to nearly $25, suggesting potential upside if the company executes on its growth and restructuring plans.