The Institutions Trim Holdings Of High-Yielding Foot Locker, Inc

The institutional support for Foot Locker (NYSE: FL) remains high at 83.4% but there is a trend in the activity investors should be aware of. While institutional support remains high, the institutions have been trimming their holdings of the stock over the past 4 quarters. The institutions have been net-sellers for the last 4 consecutive quarters including the to-date portion of Q3 which is a heavy burden for the market to beat. The institutional sellers shed shares in an amount worth 4.6% of the current market cap and aided the near 50% correction in shares prices that unfolded during that time. Now, with the company on the eve of releasing its 2nd quarter report, the question is if the institutions will continue to sell the stock or if they will start adding to their positions once again. 

The Analysts Are Underestimating Foot Locker 

The analysts are expecting a sequential and YOY decline in revenue and earnings that grossly underestimates the company’s performance and outlook. The $2.09 billion in revenue and $0.085 in adjusted EPS projected by the consensus estimate have the company on track to beat the full-year consensus but still below the company’s own guidance. At the end of last quarter, the company said it was expecting to hit the top end of its guidance for both revenue and earnings which puts the adjusted EPS well above $4.64 compared to the $4.46 consensus estimate and there is an upside risk in the guidance. 

The company’s eCommerce and brand appeal have helped it to sustain a high level of sales in the post-pandemic world and the recent inventory build has it in a position to deliver on demand. While there is an increasingly negative outlook on the economy, and warnings from retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT), consumer spending remains strong and should translate to solid results for Foot Locker. 

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As for the analysts' ratings and price targets, the sentiment is mixed and soured a bit from last year’s more bullish tone. The consensus sentiment fell to a firm Hold from a Moderate Buy over the past 12 months and the price target is down by 30% but it is still more than 30% above the current price action with potentially bullish catalysts just around the corner. A solid report from Foot Locker could not only reinvigorate the institutions but the analysts as well. 

Foot Locker Is A High-Yield Value 

Believe it or not but Foot Locker is a high-yielding value stock now that its shares have corrected from the post-pandemic run-up. The stock is trading at about 7X its earnings outlook which is low before you consider the EPS outlook is too low and very low afterward and the yield is ultra attractive too. The stock is yielding about 4.45% compared to the broad-market average of 1.45% and it has a better outlook for growth. The company suspended the payout during the peak of the pandemic but has brought it back and increased it to the prepandemic level and still only paying 16% of the consensus estimate. Based on the prepandemic history of increases, the odds are high that the company will continue to make annual increases long into the future. Comparatively, Walmart and Target are both trading at 20X or higher while paying 2.0% or lower. 

The Technical Outlook: Foot Locker Could Be At The Bottom 

The price action in Foot Locker corrected hard over the past year but might be at the bottom now. The price has bounced off of an important technical level and is in position for a move higher provided the right catalyst emerges. The bottom is near the $27.25 level but it may be broken if the Q2 results fail to impress. Assuming the results are good, the next hurdle for the market will be the 150-day EMA near $32.75.

Companies in This Article:

Company	Current Price	Price Change	Dividend Yield	P/E Ratio	Consensus Rating	Consensus Price Target
Foot Locker (FL)	$21.96	+1.6%	N/A	-6.27	Hold	$24.94
Walmart (WMT)	$59.19	-0.1%	1.40%	30.94	Moderate Buy	$61.75
Target (TGT)	$167.88	+0.8%	2.62%	18.80	Moderate Buy	$181.85