Carter's (CRI) faces a larger-than-expected tariff headwind that could force Wall Street earnings per share estimates lower, UBS said in a note emailed Tuesday.

The bank's industry checks showed firmer Q3 sales, prompting UBS to raise its Q3 EPS view to $0.15 from a loss of $0.07, but it now pegs the annualized tariff impact at roughly $235 million to $285 million versus $125 million to $150 million previously. For 2026, UBS cut its EPS forecast to $1.45, down 19%.

"Carter's Q3 result and updated tariff outlook will cause Street EPS estimates to fall, catalyzing the stock price lower," UBS said.

UBS warned the market is likely underestimating the tariff effect and that Carter's ability to mitigate the pain via price increases or sourcing changes is limited without hurting volumes.

UBS kept a neutral rating and a $26 price target on the stock.

Carter's stock rose 4.7% in recent Tuesday trading.

Price: 31.13, Change: +1.39, Percent Change: +4.67