Ralph Lauren Pinned to Neutral - Analyst Blog

By
A A A

N.Y.-based Ralph Lauren Corporation ( RL ) - a designer, marketer and distributor of lifestyle products - remain on our Neutral list with a target price of $182.00.

Why Reiterate?

At one end where we remain impressed by the company's  robust quarterly results and efforts to capture  growth opportunities, at other end  we remain cautious on the stock due to the prevailing weak macroeconomic conditions in Europe, intense competition and volatile raw material prices.


The third quarter 2013 adjusted earnings of $2.40 per share at Ralph Lauren exhibited an improvement of 34.8% from the comparable year-ago quarter as well as the Zacks Consensus Estimate of $2.21. The year-over-year increase was primarily driven by a rise in sales, improved margins and a lower tax rate.

Looking at the earnings surprise history, the company has beaten the Zacks Consensus Estimates in the past several quarters. The average positive surprise in the trailing 4 quarters comes to 11.4%.

Bolstered by better-than-expected improvement in operating margin, the company now expects it to grow between 75 basis points (bps) and 100 bps, up from its earlier guidance range of 25-75 bps.

Apart from strong third-quarter results, Ralph Lauren's growth story looks compelling. We believe that the company's sustained focus on expanding higher growth businesses, such as accessories category, along with strategically expanding its global operations, bodes well for future growth.

On the flip side, the company operates in a competitive environment and strives to maintain its market share, actively competing with numerous manufacturers and distributors of premium lifestyle products. The company primarily competes on the basis of fashion, quality and service. Failure to offer high-quality differentiated products at a competitive price may hamper Ralph Lauren's market share, and in turn it's top and bottom lines performance.

Other Stocks Worth Considering

Currently, Ralph Lauren has a Zacks Rank #2 (Buy). Other stocks worth considering in the apparel retail industry are Guess' Inc. ( GES ), Michael Kors Holdings Limited ( KORS ) and Skechers USA Inc. ( SKX ). All these companies hold a Zacks Rank #1 (Strong Buy).



GUESS INC (GES): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

RALPH LAUREN CP (RL): Free Stock Analysis Report

SKECHERS USA-A (SKX): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GES , KORS , RL , SKX

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

33,110,376
  • $113.99 ▲ 1.77%
25,034,179
    $17.98 unch
24,486,872
  • $7.41 ▲ 2.07%
20,864,535
  • $7.39 ▼ 2.76%
18,600,501
  • $8.30 ▼ 0.36%
17,530,211
  • $8.14 ▲ 3.17%
17,299,208
  • $93.79 ▲ 2.74%
14,669,760
  • $25.78 ▼ 0.19%
As of 12/26/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com