Here's Why Investors Must Retain Johnson Outdoors Stock for Now

Johnson Outdoors Inc. JOUT is benefiting from strategic investments to improve its profitability and undertaking cost savings efforts to enhance margins. Also, the company trading at a discount compared with its peers is an additional advantage that should be noticed by investors in the market.The Zacks Consensus Estimate of the company’s fourth quarter of fiscal 2024 earnings indicates year-over-year growth of 56.4%. Also, the earnings estimate for fiscal 2025 indicates a whopping 2,328.6% growth trend. The growth prospect is further solidified by a VGM Score of A, backed by Growth and Value Scores of A. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of an outperformance in the near term.However, shares of this producer of outdoor recreational products have lost 11.3% in the past three months against the Zacks Leisure and Recreation Products industry’s 9.1% growth. JOUT’s prospects are notably marred by the increased expense and cost structure and ongoing weak consumer demand. The challenging macroeconomic scenario and lingering inflation risks are contributing to these headwinds, thus adversely impacting the company's profitability.Image Source: Zacks Investment ResearchLet us discuss the factors why investors must retain this Zacks Rank #3 (Hold) stock for now.JOUT Stock’s Driving FactorsCost-Saving Efforts: Given the ongoing inflated market condition, Johnson Outdoors has been undertaking cost-saving initiatives to improve its bottom line and increase profitability. On the recent earnings call, the company announced further expansion of its cost-saving efforts and evaluation of its cost structure for additional efficiency opportunities.The primary focus of JOUT, based on this initiative, has been on its production factories and the overall business operations and getting efficiencies out of them. The increased efficiencies will directly contribute to its margin expansion and improve profitability. The company is said to have been progressing with its cost-saving expansion strategy and will provide an update on its notable business impacts in the upcoming quarter’s release. Investors can consider this aspect while making decisions in favor of JOUT stock.Accretive Investments: Apart from implementing efforts to reduce costs and increase efficiency, Johnson Outdoors is also focusing on mission-critical initiatives to drive growth. The investments primarily focus on enhancing innovation and digital and e-commerce capabilities.Innovation is one of the key factors to the company’s success as creating consumer-focused products and driving technology advancements has always enabled it to deliver the best outdoor experiences across its categories. Currently, JOUT is working on a pipeline of new products to further drive its success. Furthermore, enhancing digital and e-commerce capability is another main priority as a robust online presence provides key consumer touch points for its brands from product research to purchase to post-purchase support.Trading at a Discount: Johnson Outdoors is currently trading at a discount relative to the industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. JOUT’s forward 12-month P/E ratio is 19.2, lower than the industry’s ratio of 24.3. The discounted valuation indicates that the stock remains an attractive option for investors looking for a suitable entry point.With the ongoing cost-savings and business transformative initiatives, the company is positioning itself well for achieving notable growth across its top and bottom lines. The current discounted valuation situation may not last long, thus investors must stay ahead going forward while making decisions about the stock.Headwinds Affecting JOUTHigh Cost & Expense Structure: Although Johnson Outdoors is intently focusing on implementing cost-saving efforts and evaluating its cost structure, the ongoing inflationary market scenario is taking a toll on it. The increased costs and expenses are overshadowing the company’s margin and profitability expansion initiatives.The primary reasons for high costs and expenses include increased advertising and promotional spending. Moreover, the margin contraction is primarily attributable to unfavorable overhead absorption as a result of lower sales volumes and changes in product mix.Lower Demand Trends: The company has been facing a softer demand pattern from the start of fiscal 2024, mainly due to the continued challenging market, lingering inflation and competitive pressures.The primary low-sales contributors are JOUT’s Camping and Watercraft Recreation businesses. The decline in sales was attributable to the divestiture of the Military and Commercial Tents product lines of its Camping business and reductions in demand in the overall watercraft market. The demand patterns are likely to improve after the market is optimistic about the fading out of the ongoing challenges.Key PicksHere are some better-ranked stocks from the Consumer Discretionary sector.Atour Lifestyle Holdings Limited ATAT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.ATAT has a trailing four-quarter earnings surprise of 9.1%, on average. The stock has increased 49.4% in the past year. The Zacks Consensus Estimate for ATAT’s 2024 sales and earnings per share (EPS) indicates growth of 49.5% and 32.6%, respectively, from the year-ago levels.Norwegian Cruise Line Holdings Ltd. NCLH presently sports a Zacks Rank of 1. NCLH has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has gained 56.1% in the past year.The Zacks Consensus Estimate for NCLH’s 2024 sales and EPS indicates an increase of 9.9% and 127.1%, respectively, from the year-ago levels.Flexsteel Industries, Inc. FLXS currently sports a Zacks Rank of 1. FLXS has a trailing four-quarter negative earnings surprise of 2.5%, on average. The stock has surged 107.2% in the past year.The Zacks Consensus Estimate for FLXS’ fiscal 2025 sales and EPS indicates an increase of 3.6% and 42.2%, respectively, from the year-ago levels.Infrastructure Stock Boom to Sweep AmericaA massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.The only question is “Will you get into the right stocks early when their growth potential is greatest?”Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Flexsteel Industries, Inc. (FLXS): Free Stock Analysis Report Johnson Outdoors Inc. (JOUT): Free Stock Analysis Report Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report Atour Lifestyle Holdings Limited Sponsored ADR (ATAT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks