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PVH Up 10.2% Since Earnings Report: Can it Continue?
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A month has gone by since the last earnings report for PVH Corp. (PVH - Free Report) . Shares have added about 10.2% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is PVH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
PVH Corp. reported better-than-expected earnings and sales in fourth-quarter fiscal 2017. While this marked the company’s sixth straight sales beat, earnings topped estimates for the 15th consecutive quarter. Further, management issued bullish guidance for first-quarter and fiscal 2018.
Persistent momentum at the company’s premium brands — Calvin Klein and Tommy Hilfiger — drove the quarterly results, which exceeded expectations.
Q4 Highlights
PVH Corp.’s adjusted earnings per share came in at $1.58, up considerably 28.5% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.48 and outperformed its own guidance range of $1.42-$1.44. Currency favorably impacted earnings by 4 cents per share in the quarter.
On a GAAP basis, the company’s earnings of $1.39 per share were up 10.3% from $1.26 earned in the year-ago quarter.
Total revenues advanced 19% to $2,498.9 million and topped the Zacks Consensus Estimate of $2,345 million. On a constant-currency basis, the top line improved 13%.
The company’s total gross profit increased 20.3% year over year to $1,369 million in the quarter, with gross margin expansion of 80 basis points (bps) to 54.8%.
Adjusted EBIT was up 20.4% to $176.7 million, driven by improvement in earnings witnessed at Tommy Hilfiger and Calvin Klein. The metric was somewhat negated by an earnings decline in Heritage Brands due to higher marketing expenditures and increased corporate expenses. The adjusted EBIT margin expanded 10 bps to nearly 7.1%.
Segment Analysis
PVH Corp reports financial results under three business segments: Calvin Klein, Tommy Hilfiger and Heritage Brands.
Calvin Klein’s revenues advanced 23% year over year to $977 million while it grew 18% in constant currency. Further, the segment’s International revenues surged 33% to $512 million and 23% on a constant-currency basis. Growth in International business was backed by sturdy performance in Europe and Asia, which includes a 4% increase in international comparable store sales (comps). However, gain from 53rd week was primarily offset by a decrease in revenue attributable to the timing of the Chinese New Year.
The segment’s North America revenues were also up 13% to $464 million driven by solid wholesale performance in all categories along with a 4% rise in comps. However, the gain from a 53rd week was mitigated by a decline in revenues due to the deconsolidation of the segment’s business in Mexico in November 2016.
Revenues at the company’s Tommy Hilfiger segment jumped 22% to $1.1 billion while it improved 15% in constant currency. The improvement in revenues can be primarily attributed to sales growth of 37% to $702 million in the brand’s International business owing to stellar performance in all regions and channels, gain from the 53rd week, and 6% comps growth.
Additionally, the segment’s North America business witnessed 5% increase in revenues to $439 million (4% growth in constant currency) driven by a 10% rise in comps. However, the metric was partly offset by a decline in the wholesale off-price distribution. Further, the decline in revenues from discontinuation of its directly-operated womenswear wholesale business in the United States and Canada in fourth-quarter fiscal 2016, in connection with the licensing of the business to G-III Apparel Group, Ltd. (GIII), was mitigated by gain from the 53rd week in fourth-quarter fiscal 2017.
Meanwhile, the Heritage Brands segment’s revenues remained flat year over year. However, the segment’s comps improved 1%.
Share Repurchase
In fiscal 2017, the company bought back 2.2 million shares for roughly $250 million under its $1.25 billion standing authorization that extends till Jun 3, 2020.
Guidance
Following the robust quarterly performance, positive impacts from foreign currency rates and continued strength across its brands, management issued impressive first-quarter and fiscal 2018 guidance.
For fiscal 2018, the company projects revenues to rise 7% while constant-currency revenues are expected to grow 4% in comparison to fiscal 2017. Brand-wise, the metric is anticipated to increase roughly 9% (or 7% on a currency-neutral basis) at Calvin Klein and 8% (or 4% on a currency-neutral basis) at Tommy Hilfiger. Further, the company expects revenues from its Heritage Brands to be flat year over year.
Net interest expenses are expected to decline to $120 million in fiscal 2018 from $122 million in the prior year. The effective tax rate for the fiscal is projected in a band of 14.5-15.5%, including the anticipated impact of the Tax Legislation.
Management envisions fiscal 2018 adjusted earnings per share in the range of $9.00-$9.10, compared with $7.94 last year. GAAP earnings per share are projected in the range of $8.76-$8.86 compared with $6.84 earned in fiscal 2017. Earnings projections include gain of roughly 35 cents per share from foreign currency translations, both on GAAP and non-GAAP basis.
Q1 Guidance
For first-quarter fiscal 2018, the company expects total revenues to increase nearly 15% year over year while it is anticipated to advance 9% on a constant-currency basis. Brand-wise, revenues are expected to grow 17% (or 12% on a currency-neutral basis) at Calvin Klein, 19% (or 10% on a currency-neutral basis) at Tommy Hilfiger and 2% at Heritage Brands.
Net interest expenses are anticipated to remain flat at $29 million in the fiscal first quarter. The effective tax rate for the quarter is anticipated in a band of 16-17% that includes the planned impact of the Tax Legislation.
Adjusted earnings per share are expected in a band of $2.20-$2.25 than $1.65 in the year-ago quarter. On a GAAP basis, the company envisions earnings per share of $2.13-$2.18 compared with 89 cents in the prior-year quarter. Both GAAP and adjusted earnings guidance include 20 cents per share gain from foreign currency.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.
At this time, PVH has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PVH has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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PVH Up 10.2% Since Earnings Report: Can it Continue?
A month has gone by since the last earnings report for PVH Corp. (PVH - Free Report) . Shares have added about 10.2% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is PVH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
PVH Corp. reported better-than-expected earnings and sales in fourth-quarter fiscal 2017. While this marked the company’s sixth straight sales beat, earnings topped estimates for the 15th consecutive quarter. Further, management issued bullish guidance for first-quarter and fiscal 2018.
Persistent momentum at the company’s premium brands — Calvin Klein and Tommy Hilfiger — drove the quarterly results, which exceeded expectations.
Q4 Highlights
PVH Corp.’s adjusted earnings per share came in at $1.58, up considerably 28.5% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.48 and outperformed its own guidance range of $1.42-$1.44. Currency favorably impacted earnings by 4 cents per share in the quarter.
On a GAAP basis, the company’s earnings of $1.39 per share were up 10.3% from $1.26 earned in the year-ago quarter.
Total revenues advanced 19% to $2,498.9 million and topped the Zacks Consensus Estimate of $2,345 million. On a constant-currency basis, the top line improved 13%.
The company’s total gross profit increased 20.3% year over year to $1,369 million in the quarter, with gross margin expansion of 80 basis points (bps) to 54.8%.
Adjusted EBIT was up 20.4% to $176.7 million, driven by improvement in earnings witnessed at Tommy Hilfiger and Calvin Klein. The metric was somewhat negated by an earnings decline in Heritage Brands due to higher marketing expenditures and increased corporate expenses. The adjusted EBIT margin expanded 10 bps to nearly 7.1%.
Segment Analysis
PVH Corp reports financial results under three business segments: Calvin Klein, Tommy Hilfiger and Heritage Brands.
Calvin Klein’s revenues advanced 23% year over year to $977 million while it grew 18% in constant currency. Further, the segment’s International revenues surged 33% to $512 million and 23% on a constant-currency basis. Growth in International business was backed by sturdy performance in Europe and Asia, which includes a 4% increase in international comparable store sales (comps). However, gain from 53rd week was primarily offset by a decrease in revenue attributable to the timing of the Chinese New Year.
The segment’s North America revenues were also up 13% to $464 million driven by solid wholesale performance in all categories along with a 4% rise in comps. However, the gain from a 53rd week was mitigated by a decline in revenues due to the deconsolidation of the segment’s business in Mexico in November 2016.
Revenues at the company’s Tommy Hilfiger segment jumped 22% to $1.1 billion while it improved 15% in constant currency. The improvement in revenues can be primarily attributed to sales growth of 37% to $702 million in the brand’s International business owing to stellar performance in all regions and channels, gain from the 53rd week, and 6% comps growth.
Additionally, the segment’s North America business witnessed 5% increase in revenues to $439 million (4% growth in constant currency) driven by a 10% rise in comps. However, the metric was partly offset by a decline in the wholesale off-price distribution. Further, the decline in revenues from discontinuation of its directly-operated womenswear wholesale business in the United States and Canada in fourth-quarter fiscal 2016, in connection with the licensing of the business to G-III Apparel Group, Ltd. (GIII), was mitigated by gain from the 53rd week in fourth-quarter fiscal 2017.
Meanwhile, the Heritage Brands segment’s revenues remained flat year over year. However, the segment’s comps improved 1%.
Share Repurchase
In fiscal 2017, the company bought back 2.2 million shares for roughly $250 million under its $1.25 billion standing authorization that extends till Jun 3, 2020.
Guidance
Following the robust quarterly performance, positive impacts from foreign currency rates and continued strength across its brands, management issued impressive first-quarter and fiscal 2018 guidance.
For fiscal 2018, the company projects revenues to rise 7% while constant-currency revenues are expected to grow 4% in comparison to fiscal 2017. Brand-wise, the metric is anticipated to increase roughly 9% (or 7% on a currency-neutral basis) at Calvin Klein and 8% (or 4% on a currency-neutral basis) at Tommy Hilfiger. Further, the company expects revenues from its Heritage Brands to be flat year over year.
Net interest expenses are expected to decline to $120 million in fiscal 2018 from $122 million in the prior year. The effective tax rate for the fiscal is projected in a band of 14.5-15.5%, including the anticipated impact of the Tax Legislation.
Management envisions fiscal 2018 adjusted earnings per share in the range of $9.00-$9.10, compared with $7.94 last year. GAAP earnings per share are projected in the range of $8.76-$8.86 compared with $6.84 earned in fiscal 2017. Earnings projections include gain of roughly 35 cents per share from foreign currency translations, both on GAAP and non-GAAP basis.
Q1 Guidance
For first-quarter fiscal 2018, the company expects total revenues to increase nearly 15% year over year while it is anticipated to advance 9% on a constant-currency basis. Brand-wise, revenues are expected to grow 17% (or 12% on a currency-neutral basis) at Calvin Klein, 19% (or 10% on a currency-neutral basis) at Tommy Hilfiger and 2% at Heritage Brands.
Net interest expenses are anticipated to remain flat at $29 million in the fiscal first quarter. The effective tax rate for the quarter is anticipated in a band of 16-17% that includes the planned impact of the Tax Legislation.
Adjusted earnings per share are expected in a band of $2.20-$2.25 than $1.65 in the year-ago quarter. On a GAAP basis, the company envisions earnings per share of $2.13-$2.18 compared with 89 cents in the prior-year quarter. Both GAAP and adjusted earnings guidance include 20 cents per share gain from foreign currency.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.
PVH Corp. Price and Consensus
PVH Corp. Price and Consensus | PVH Corp. Quote
VGM Scores
At this time, PVH has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PVH has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.