YETI (NYSE:YETI) Reports EPS Above Analyst Estimates In Q4 Earnings

Outdoor lifestyle products brand (NYSE:YETI) fell short of the market’s revenue expectations in Q4 CY2024, but sales rose 5.1% year on year to $546.5 million. Its non-GAAP profit of $1 per share was 7.7% above analysts’ consensus estimates.

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Matt Reintjes, President and Chief Executive Officer, commented, “YETI’s full year 2024 was capped off by a strong fourth quarter that showcased the expanding YETI brand, growing product innovation, and impactful global expansion. Our topline results show the proof points of our brand and product strength combined with operational execution to deliver excellent adjusted gross margin and adjusted operating margin expansion plus very strong free cash flow generation, resulting in a strong balance sheet. We delivered these results in a market that we believe continues to show signs of more discerning consumer buying behavior, more promotional activity, and heightened competition, particularly in the U.S. market. In the fourth quarter, the strong, broad-based demand for our innovation in our Coolers & Equipment category, specifically in hard coolers and bags, highlights that our innovation and brand resonates in this market. We believe this demand continues to showcase the long-term durability of the brand and product growth potential. Drinkware remains one of the more contested product categories, and our strategy of diversifying and innovating across our portfolio continues to produce results domestically and globally. Importantly, in both the fourth quarter and full year 2024, YETI complemented the focus on our long-term strategic priorities of brand, product and global expansion with meaningful execution of capital allocation. For the year, we announced $200 million in share buybacks, acquired Mystery Ranch to support our targeted M&A strategy of supporting our innovation and product expansion, and in the fourth quarter acquired capabilities, technology, and IP that we believe will enable us to develop a unique powered cooler system. We are excited about how this technology will complement our portfolio and, much like Mystery Ranch, how this showcases the leveraging of our powerful balance sheet to support our future product innovation.”

Company Overview

Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.

Leisure Products

Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, YETI grew its sales at a 14.9% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our benchmark for the consumer discretionary sector, which enjoys a number of secular tailwinds.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. YETI’s recent history shows its demand slowed as its annualized revenue growth of 7.1% over the last two years is below its five-year trend.

This quarter, YETI’s revenue grew by 5.1% year on year to $546.5 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its newer products and services will not accelerate its top-line performance yet.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

YETI has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.9% over the last two years, slightly better than the broader consumer discretionary sector.

YETI’s free cash flow clocked in at $215.1 million in Q4, equivalent to a 39.4% margin. This result was good as its margin was 8.7 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts’ consensus estimates show they’re expecting YETI’s free cash flow margin of 12% for the last 12 months to remain the same.

Key Takeaways from YETI’s Q4 Results

We enjoyed seeing YETI exceed analysts’ EBITDA expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this quarter had some key positives. The stock traded up 3.5% to $39.30 immediately after reporting.

Is YETI an attractive investment opportunity at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.