Levi Strauss earnings preview: where next for LEVI stock?

Levi Strauss is due to report second-quarter results this week, with investors eagerly waiting to see if sales have continued to recover since stores reopened. We explain what to expect from the results and consider how Levi Strauss shares could react.

Charts (4)

Levi Strauss Q2 earnings: when will they be released?

Levi Strauss will release second-quarter results on Thursday July 8. This will cover the three months to the end of May.

What to expect from the Levi results

Levi Strauss, known around the world for its denim jeans, has been steadily recovering since being hammered by the closure of stores last year. Although some remained closed, the vast majority of them are open and sales have been recovering faster than expected.

Analysts are expecting quarterly revenue to jump to $1.21 billion from just $497.5 million the year before and for the company to report diluted EPS of $0.10 compared to a $0.91 loss. Importantly, the results will be flattered as it comes up against weak comparatives from last year when the pandemic erupted and lockdowns were first introduced, causing sales to plunge and pushing it into the red.

The online segment of the business will still be under the spotlight even as stores have reopened. Digital sales were up 41% in the first quarter and accounted for 26% of total sales, while its direct-to-consumer digital offering reported a 10% jump in sales.

Investors will want to see evidence that the recovery has continued into the second-quarter. Europe will be closely watched after Levi Strauss said the situation there remained highly uncertain back in April. Investors will also be eagerly watching to see if the company has managed to maintain the record gross margins delivered in the first quarter.

Investors will be hoping for a buoyant outlook. Markets currently expect Levi Strauss to stage a strong recovery and believe profits can return to pre-pandemic levels this year.

Notably, the company raised its guidance for the first-half back in April and said it was aiming to deliver 24% to 25% year-on-year growth in revenue and adjusted earnings per share of $0.41 to $0.42 compared to a $0.07 loss the year before. It also raised its second-quarter dividend to $0.06 from the $0.04 paid in the first to reflect its growing confidence.

That is supported by a bullish view from brokers, which unanimously agree that the company is currently undervalued despite the fact shares have risen over 43% since the start of 2021. They currently have an average Buy rating on the stock with a target price of $31.25, about 9% higher than its current share price. Three brokers rate the stock as a Strong Buy and six at Buy. No brokers rate the stock at Hold, Sell or Strong Sell.

Where next for LEVI stock?

The Levi share price has been trending higher since September last year. The price hit an all-time high of $30.84 in early May and eased lower. The share price continues to trade above its 50 & 100 day sma and its multi-month ascending trendline, having briefly dipped below two of these keys supports in June. 

The RSI is above 50 but below the overbought level of 70 and pointing higher, suggesting that there could be more upside to be had.  

Resistance can be seen around $29.75 the high May 12 & 18, before buyers look to target $30.84 and beyond to fresh all-time highs. 

On the flip side, immediate support can be seen at $27.70 the 50 sma and $27.50 the ascending trendline support. A breakthrough this zone of contention could open the door to the 100 sma at $26.20 and on towards $24.40. It would take a move below $24.40 for the sellers to pick up traction. 

How to trade LEVI stock

You can trade Levi Strauss shares with City Index by following these four easy steps:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘Levi Strauss’ or ‘LEVI’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade 

More from Equities

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.