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Shares of PVH Corp. (PVH - Analyst Report) – world’s largest shirt and neckwear company – reached a new 52-week high of $121.26 on Friday, Jan 25, beating its previous 52-week high of $119.62. The closing share price of the company on Jan 28, 2013 stood at $120.86, representing a solid return of approximately 69.9% since Jan 3, 2012. Average volume of shares traded over the last 3 months came in at approximately 1,058,470.

Growth Drivers

An impressive record of beating the quarterly earnings expectations, a positive fiscal 2012 outlook and expanding business through acquisition mainly drove the upside in the shares of PVH Corp.

PVH reported an outstanding bottom-line performance in the third quarter of fiscal 2012, driven by solid improvement in margins along with a lower tax rate. The company’s adjusted earnings per share jumped approximately 24% year over year to $2.34, beating the Zacks Consensus Estimate of $2.29.

However, the company’s total revenue inched down 1% on a year-over-year basis to $1.643 in the year-ago quarter. The year-over-year revenue growth at the company’s Tommy Hilfiger and Calvin Klein segments were more than offset by the decline at its Heritage Brands segment and unfavorable foreign currency exchange rates. However, quarterly revenue surpassed the Zacks Consensus Estimate of $1.638 billion.

Bolstered by continued growth momentum at Tommy Hilfiger and Calvin Klein brands, the company raised its fiscal 2012 earnings guidance range to $6.37–$6.38 per share, up from previous guidance range of $6.32–$6.37. The current Zacks Consensus Estimate for the fiscal is pegged at $6.39 per share, which is above the company’s guidance range. Moreover, PVH Corp. expects net sales to increase 2% from the fiscal 2011 level.

Further, we believe that the acquisition of The Warnaco Group, Inc. will facilitate the company to have operations at every major consumer market in the world, which will ultimately boost its top line. It is expected that the acquisition will increase the company’s 2013 earnings by 35 cents per share.

Valuation Stretched, Yet Lucrative

PVH Corp. currently trades at a forward P/E of 18.92x, reflecting a 38.8% premium to the peer group average of 13.63x. Its price-to-sales ratio of 1.48 is also at a premium to the peer group average of 1.37. Given the company’s compelling fundamentals, the premium valuation is justified and well supported by its long-term estimated EPS growth rate of 14.5% versus 12.8% for the peer group. The company has a market cap of approximately $8.54 billion.

Other Stocks to Consider

Apart from PVH Corp., other stocks’ share prices in the industry that are gaining momentum include Hanesbrands Inc. (HBI - Analyst Report) and Ralph Lauren Corporation (RL - Analyst Report). Hanesbrands and Ralph Lauren’s share prices rose approximately 15.4% and 6.1%, respectively, since both the company’s reported better-than-expected bottom-line performance. All of these companies carry a Zacks Rank #2 (Buy).

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