Cowen Says PVH's Growth Expectations Are Too High, Downgrades Stock
Tommy Hilfiger and Calvin Klein parent company PVH Corp (NYSE: PVH) is among the most recommended clothing stocks in the sector and faces expectations from the Street that are too high, according to Cowen.
The Analyst
Cowen's John Kernan downgraded PVH from Outperform to Market Perform with a price target lowered from $142 to $119.
The Thesis
PVH is 85 percent Buy-rated by the Street, which implies the clothing company is expected to show "elevated" growth and margins over the coming years, Kernan said in a note. The more likely scenario, however, is that top-line or margins could fall short of expectations as the Calvin Klein brand undergoes a period of restructuring. This could result in total non-GAAP EPS growth of a mid-to-high single-digit versus the Street's expectations of a double-digit growth.
Cowen is also modeling top-line growth to cool down from 7 percent growth in fiscal 2018 to around 3 percent annually through fiscal 2022. Part of the reason for lower expectations comes from continued uncertainty among PVH's five largest wholesale retail partners, which accounts for around 19 percent of total sales and is down from as much as 22.2 percent in fiscal 2015.
PVH's stock is trading at 11 times fiscal 2019 EPS estimates, which the analyst said is a discount to its recent history of 15 times. The current valuation is also similar to rival lifestyle brands on an EV/EBITDA basis of eight times. As such, the valuation offers a certain degree of protection against downside but the Street's expectations for strong growth is wrong and the stock has limited upside potential.
Price Action
Shares of PVH were down 4.5 percent at $105.21 Tuesday afternoon.
Related Links:
Cowen Suits Up With Nike, Looks To Outperform
PVH Corp Analysts: Tommy Hilfiger Is Hot, Calvin Klein Is Not
Photo via Wikimedia.
Latest Ratings for PVH
Jan 2019 | Cowen & Co. | Downgrades | Outperform | Market Perform |
Jan 2019 | Nomura | Maintains | Neutral | Neutral |
Jan 2019 | RBC Capital | Initiates Coverage On | Outperform |
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