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Why Levi Strauss Stock Just Popped 9%

By Rich Smith – Oct 7, 2021 at 12:57PM

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Levi beat on earnings last night -- and expects to do it again for the full year.

What happened

Levi Strauss & Co. (LEVI 3.03%) stock is on a tear -- the good kind. As of 11:50 a.m. EDT, shares of the jeans maker were up 9.1% after Levi soared past analyst projections for Q3 earnings last night.

Heading into the third quarter, Wall Street had forecast Levi would earn $0.37 per share on $1.48 billion in sales. Levi only just edged out that revenue projection ($1.5 billion in sales), but it crushed on earnings, reporting a per-share profit of $0.47.  

A rack full of blue jeans

Image source: Getty Images.

So what

Sales for the fiscal third quarter surged 41% year over year, and were also up 3% from Q3 2019 (a two-year comparison that a lot of consumer goods companies have been making this year, to give a better picture of their performance ex-COVID-19).  

The profits picture was even better. Compared to last year's pandemic-hobbled Q3, Levi's earnings grew more than 570%. Compared to the more normal year of 2019, earnings were still up a very respectable 57%. And all of this was despite CEO Chip Bergh saying that the "macro-environment" in 2021 was "more difficult ... than we expected." Like a sturdy pair of denim, despite supply chain issues and rising inflation, Levi withstood the punishment.

Now what

And it plans to keep on doing so.

Issuing new guidance for the quarter that's currently underway, Levi says it expects revenue to rise 20% to 21% in comparison to Q4 2020, and 6% to 7% in comparison to Q4 2019. Based on historical data provided by S&P Global Market Intelligence, that appears to work out to quarterly sales as high as $1.68 billion. Earnings-wise, management is guiding toward $0.38 to $0.40 in adjusted earnings per share, in line with analyst estimates (although when calculated according to generally accepted accounting principles, the GAAP earnings might be a bit lower).

Still, that should work out to adjusted earnings of $1.43 to $1.45 per share for the year -- more than $0.10 above Wall Street estimates -- in other words, another earnings beat for Levi.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Levi Strauss & Co. Stock Quote
Levi Strauss & Co.
$17.02 (3.03%) $0.50

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