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PVH Corp (PVH) Down 2.4% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for PVH Corp. (PVH - Free Report) . Shares have lost about 2.4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PVH due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

PVH Corp Retains Earnings Beat Trend in Q1, Ups View

PVH Corp reported better-than-expected earnings and sales in first-quarter fiscal 2018. While the company witnessed seventh straight sales beat, earnings topped estimates for the 16th consecutive quarter. Further, management issued bullish guidance for the fiscal second quarter and raised its earnings view for fiscal 2018.

Consistent momentum at the company’s premium brands — Calvin Klein and Tommy Hilfiger — aided the quarterly results in exceeding expectations.

Q1 Highlights

PVH Corp’s adjusted earnings per share were $2.36, reflecting substantial growth of 43% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $2.25 and outperformed the company’s guidance of $2.20-$2.25. Currency favorably impacted earnings by 20 cents per share in the reported quarter.

On a GAAP basis, the company’s earnings of $2.29 per share were up 157.3% from 89 cents in the year-ago quarter.

Total revenues advanced 16.4% to $2,314.6 million and topped the Zacks Consensus Estimate of $2,257 million. On a constant-currency basis, the top line improved 10%. Top-line growth stemmed from broad-based strength across the company’s global businesses, with continued momentum in Calvin Klein and Tommy Hilfiger.

The company’s total gross profit increased 19.4% year over year to $1,291 million in the quarter under review, with gross margin expansion of 150 basis points (bps) to 55.8%.

Adjusted EBIT was up 30.5% to $251.2 million, backed by growth across all businesses. The adjusted EBIT margin expanded 120 bps to nearly 10.9%.

Segment Analysis

PVH Corp reports financial results under three business segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.

Calvin Klein’s revenues improved 18% year over year to $890 million while witnessing 12% increase in constant currency. The segment’s International revenues surged 25% to $475 million and 14% on a constant-currency basis. Growth in International business was backed by persistent strength in Europe and Asia, which includes a 9% increase in international comparable store sales (comps). The segment’s North America revenues were also up 10% to $415 million, driven by solid wholesale performance in all categories along with 5% rise in comps.

Revenues at the company’s Tommy Hilfiger segment jumped 21% to $1 billion while improving 11% in constant currency. The improvement in revenues can be primarily attributed to sales growth of 25% to $655 million in the brand’s International business owing to a stellar performance in all regions and channels, and 9% comps growth. Additionally, the segment’s North America business witnessed both reported and constant-currency revenue growth of 13% to $361 million, driven by a 9% rise in comps and solid growth in wholesale business.

Meanwhile, the Heritage Brands segment’s revenues grew 5% year over year to $409 million. The increase was backed by a change in the timing of shipments into the fiscal first quarter from second quarter compared with the prior year periods. Moreover, the segment’s comps improved 1%.

Share Repurchase

In first-quarter fiscal 2018, the company bought back 400,000 shares for roughly $54 million under its $1.25-billion standing authorization that extends till Jun 3, 2020. Since its inception, the company repurchased nearly 7.1 million shares for $745 million under the program.

FY18 Guidance

Following the robust quarterly performance and continued strength across its brands, management raised its earnings guidance for fiscal 2018. Additionally, the company issued an optimistic view for the fiscal second quarter.

For fiscal 2018, the company anticipates revenues to rise 6% while constant-currency revenues are expected to grow 5% in comparison with fiscal 2017. Brand-wise, the metric is expected to increase 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, 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 to be 14.5-15.5%, including the anticipated impact of the tax legislation.

Management now envisions fiscal 2018 adjusted earnings per share of $9.05-$9.15 compared with $9.00-$9.10 guided earlier and $7.94 reported in the prior-year period. GAAP earnings per share are now projected to be $8.81-$8.91 compared with $8.76-$8.86 estimated earlier. Earnings projections include gain of roughly 12 cents per share from foreign currency translations, both on GAAP and non-GAAP basis.

Q2 Guidance

For second-quarter fiscal 2018, the company expects total revenues to increase nearly 10% year over year while it is anticipated to advance 9% on a constant-currency basis. Brand-wise, revenues are expected to grow 15% (or 14% on a currency-neutral basis) at Calvin Klein, 13% (or 12% on a currency-neutral basis) at Tommy Hilfiger and 4% at Heritage Brands.

Net interest expenses are anticipated to remain flat at $30 million in the fiscal second quarter. The effective tax rate for the quarter is expected to be 19-20%, including the planned impact of the tax legislation.

Adjusted earnings per share are expected to be $2.05-$2.10 than $1.69 in the year-ago quarter. On a GAAP basis, the company envisions earnings per share of $1.98-$2.03 compared with $1.52 in the prior-year quarter. Both GAAP and adjusted earnings guidance include nearly 3 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 poor Growth Score of F, however its Momentum is doing a lot better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, PVH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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