The insiders and institutions are buying Wolverine Worldwide (NYSE: WWW). The stock is trading at the lowest levels in 7 years, including the pandemic lows, offering great value and a decent yield. The latest insider activity was in December 2022 but is significant in that not 1, but 3 key insiders, including the CEO, the CFO and a director, made purchases around the same time and at the same price levels.
Their purchases amount to about $1 million and have total insider holdings up to 4.73%, which is quite high given the institutional involvement.
The institutions, which have been net buyers on a quarter-to-quarter basis for the last 11 consecutive quarters, including the first month of Q1 2023, own about 97% of the stock. The largest holders include BlackRock, Vanguard and EARNEST Partners, which control about 35% of the company.
The takeaway here is that this stock has been bought on up cycles and down cycles since before the pandemic, and nothing about that or the current economic condition has changed it. The institutions like this company, and its dividend want more.
The Analysts Are Holding; Earnings Could Be A Catalyst
The analysts' sentiment in Wolverine Worldwide has fallen over the last year from a Moderate Buy to a Firm Hold with a price target of $19.38. That’s 18% above the current price action but down 50% versus last year and the trend is down. That will provide downward pressure on the price action in the near term, but there is a catalyst that could change the situation dramatically.
The company missed consensus targets on the top and bottom lines last quarter and lowered its guidance which has helped to depress the share price and has the outlook for Q4 results in poor shape. As it is, the analysts expect a sequential decline in revenue and earnings coupled with such a sharp margin contraction to produce an operating loss.
While a contraction in earnings is to be expected, the size of the loss is significant and sets the bar very low and perhaps easy to beat.
The company also announced a cost-saving plan and divestiture that are expected to enhance profitability so there could be good news in the guidance as well. This means a chance for the analyst's sentiment to not only firm but for price targets to firm and possibly begin moving higher. Wolverine Worldwide is slated to report earnings on February 22nd.
“While we are pleased to see WWW acting with urgency to simplify the business and to drive better operating performance, we also believe achieving double-digit operating margin by 2024E could prove challenging amid potential economic headwinds,” said Baird analysts Jonathan Komp.
Wolverine Worldwide Dividend Is Safe
While there are risks to the business, those are near-term in nature and do little to dampen the dividend outlook. The company is paying only 20% of its earnings, which is manageable even with slightly elevated debt levels. The company may not increase the payment soon, but there is a history of increases, so investors today might expect them to resume over the next 2-3 years.
Turning to the chart, it looks like there is a bottom in play for Wolverine Worldwide. The question is whether the results will be enough to fuel a reversal or if the stock has entered a new trading range. Lackluster results could easily leave the stock in a range with a top near $18 or lower. Strong results could send WWW above the $18 and up toward the $19.38 consensus target.