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PVH Corp Surges 30% in a Year: What's Aiding the Rally?


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Robust earnings surprise history, efficient brand management and strong cash flows are aiding PVH Corp. PVH to scale higher. Also, its efforts to keep pace with the evolving consumer trends are commendable.

In a year's time, this Zacks Rank #3 (Hold) stock has surged 30%, outperforming the broader Consumer Discretionary sector's 12.6% rally. Notably, the company delivered 16th straight quarter of earnings beat in first-quarter fiscal 2018. We believe the company will continue to impress investors on the earnings front as evident from its long-term earnings growth rate of 12.6%. Additionally, management envisions fiscal 2018 adjusted earnings per share of $9.05-$9.15 compared with $7.94 reported in fiscal 2017. The Zacks Consensus Estimate is pegged higher at $9.19 for the fiscal year.



What's Aiding This Robust Performance?

Apart from impressive earnings history, PVH Corp. is performing well on the top-line front. In fact, it has delivered top line beat in the last seven quarters. For fiscal 2018, the company anticipates revenues to rise 6% while the same is expected to grow 5% (on a constant-currency basis) compared with fiscal 2017.

PVH Corp.'s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth. Also, the company's approach toward brand management facilitates each of its brands to develop further through efficient marketing strategies, financial control and operating leverage. Notably, its Tommy Hilfiger and Calvin Klein brands have been performing exceedingly well, particularly in the international regions. These brands are likely to continue with its robust performance, which is apparent from brands' upbeat guidance.

For fiscal 2018, management anticipates revenues to rise roughly 8% (or 7% on a currency-neutral basis) at Calvin Klein and 7% (or 6% on a currency-neutral basis) at Tommy Hilfiger. Further, it expects second-quarter fiscal 2018 revenues to grow 15% (or 14% on a currency-neutral basis) at Calvin Klein and 13% (or 12% on a currency-neutral basis) at Tommy Hilfiger. This is likely to significantly boost the company's top line and overall profitability.

However, it is exposed to foreign currency translation risks, given PVH Corp.'s substantial international presence. Fortunately, currency has been working in favour of the company for the moment and is aiding growth. Notably, adjusted earnings included 20 cents per share positive impact from foreign currency in first-quarter fiscal 2018.

Further, the company's earnings outlook for second-quarter and fiscal 2018 reflect significant currency tailwinds. Favorable currency is likely to boost adjusted earnings per share by 3 cents in the fiscal second quarter and 12 cents in fiscal 2018.

PVH Corp. also boasts a healthy balance sheet, which provides it with the financial flexibility to boost growth across its business. In fact, the company's ability to generate a strong operating cash flow has helped in the execution of its long-term strategies such as global expansion, product enhancement and brand offerings, and building of operational infrastructure. Notably, in first-quarter fiscal 2018, management repurchased 400,000 shares for roughly $54 million under its $1.25-billion standing authorization that extends till Jun 3, 2020.

Despite these tailwinds, the company is not devoid of persistent concerns. Volatility in the global markets and intense competition remain woes.

Nevertheless, we believe PVH Corp.'s solid brand strategies, healthy balance sheet and other robust initiatives poise the company well for long-term growth.

Better-Ranked Textile-Apparel Stocks

Delta Apparel, Inc. DLA pulled off an average positive earnings surprise of 71.2% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

lululemon athletica inc. LULU has a long-term earnings growth rate of 13.4% and a Zacks Rank #1.

G-III Apparel Group, Ltd. GIII , also a Zacks Rank #1 stock, has an impressive long-term earnings growth rate of 15%.

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



This article appears in: Investing , Business , Stocks
Referenced Symbols: LULU , PVH , GIII , DLA


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