PVH poised for powerful Q3 results

PVH Corp will report its third-quarter figures on Wednesday 3 December. Can the clothing company hit its high forecast?

Tommy Hilfiger store
Source: Bloomberg

PVH’s shares were jolted higher in September when the company revealed a strong set of second-quarter results, and the outlook for the third-quarter and full-year were raised. In the second quarter, the company swung to a profit of $126.6 million from a loss of $5.4 million, but the icing on the cake was the increase in guidance of third-quarter earnings per share to a range of 245-250 cents. This is a 15% increase on the previous guidance. The company is predicting growth of 1% at the Calvin Klein business while growth of 3% and 4% is expected at Heritage Brands and Tommy Hilfiger respectively.

PVH is playing the promotional game like others in the industry in the hope of attracting savvy shoppers. CEO, Emanuel Chrico, holds concerns about the economic climate and is ‘cautiously optimistic’ for the second-half of the financial year. It sounds to me as though he is more optimistic than he is letting on; the guidance was upped after all.

In September, the second-quarter figures impressed dealers, especially the earnings metric. The revenue for the period came in at $1.97 billion while analysts were expecting $1.98 billion. EPS was 151 cents and the consensus was for 142 cents.

PVH will announce its final-year figures in March 2014. The consensus is for revenue of $8.38 billion and EPS of $7.37, which compares with last year’s revenue and EPS of $8.18 billion and $7.03 respectively. Reassurance of this year-end forecast is essential.

Equity analysts are very bullish on the stock. Out of the 21 recommendations, 15 are buys, four are holds and two are sells, with the average target price for the stock of $143.76. This is a 14% premium over the current price. Analysts have a similar outlook for fashion house Michael Kors. The buy, hold,and sell breakdown is 14,10, 2 and the average price target is $94.60. This is considerably higher than the current price of $76.81.

Traders are expecting third-quarter revenue of $2.25 billion and EPS of 248 cents from PVH corp.

A good set of results could set the stock on track to $130, a level last tested in September. Meanwhile, downbeat numbers could push the share price to $120, which coincides with the 200-day moving average.

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