NEW YORK (TheStreet) -- Shares of Williams-Sonoma, Inc. (WSM) are gaining, up 2.16% to $69.87 in late afternoon trading Friday, after the multi-channel specialty retailer of home products had its rating raised to "outperform" from "market perform" by analysts at Wells Fargo (WFC) this morning.
Also, analysts at Wedbush Securities issued a positive note on Williams-Sonoma and said the company's third-quarter earnings would likely fall in the high end of its guidance range of between 58 cents to 63 cents per share.
Analysts at Wedbush said the firm's channel checks indicated an on-trend merchandise assortment at Pottery Barn and West Elm.
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The San Francisco-based company operates under brands including Williams-Sonoma, Pottery Barn, and West Elm and sells products through its seven e-commerce websites and eight direct-mail catalogs in addition to its retail stores.
Separately, TheStreet Ratings team rates WILLIAMS-SONOMA INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate WILLIAMS-SONOMA INC (WSM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WSM's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WILLIAMS-SONOMA INC has improved earnings per share by 8.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WILLIAMS-SONOMA INC increased its bottom line by earning $2.85 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $2.85).
- WSM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, WILLIAMS-SONOMA INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: WSM Ratings Report