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PVH (PVH) Up 5.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for PVH (PVH). Shares have added about 5.3% in that time frame, outperforming the S&P 500.

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 the most recent earnings report in order to get a better handle on the important drivers.

PVH Corp Beats Q3 Earnings Estimates, Raises 2021 View

PVH reported third-quarter fiscal 2021 results, wherein the bottom line surpassed the Zacks Consensus Estimate, while the top line missed the same. Both metrics improved year over year. The results gained from brand strength, particularly in Calvin Klein and Tommy Hilfiger, as well as the solid performance in its international business and robust pricing actions. The company also noted that holiday season sales are off to a solid start. Management raised the fiscal 2021 view.

Q3 Highlights

PVH Corp reported adjusted earnings of $2.67 per share compared with the year-ago quarter's $1.32. The bottom line beat the Zacks Consensus Estimate of $2.07. On a GAAP basis, the company reported earnings of $3.89 per share, reflecting a sharp improvement from 98 cents in the prior-year quarter.

In the fiscal third quarter, revenues advanced 10% year over year to $2,333 million. However, the top line missed the Zacks Consensus Estimate of $2,402 million. Adverse impacts related to the shift in the timing of wholesale shipments across the United States from the third quarter to the fourth as well as the sale of the Heritage Brands business hurt the top line to some extent.

Direct-to-consumer revenues remained flat year over year in the quarter. The company's retail stores continue to face pressure due to the pandemic. Certain stores in Australia remained closed for the majority of the quarter. Wholesale revenues jumped 17% in the fiscal third quarter, driven by double-digit growth in the online business of its traditional and pure-play wholesale customers. Revenues in the digital channel rose roughly 15%, representing 21% of total revenues in the quarter under review.

The company's gross profit amounted to $1,345.1 million, up 22.1% year over year. The gross margin expanded 570 bps to 57.7%, owing to full-price selling and a positive sales mix, which offset higher freight costs. Adjusted selling, general and administrative expenses rose 11.5% year over year to $1,089.3 million. Adjusted earnings before interest and taxes totaled $266 million compared with $132 million in the prior-year quarter, driven by higher sales and improved margins.

Segment Analysis

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

Revenues for the Calvin Klein segment improved 22% year over year. While sales for Calvin Klein North America increased 27% and Calvin Klein International climbed 19%.

Revenues for the Tommy Hilfiger segment rose 12% year over year in the reported quarter. Revenues were up 13% at Tommy Hilfiger North America and 11% at Tommy Hilfiger International.

The Heritage Brands segment's revenues declined 36% year over year in the quarter under review.

Financial Details

PVH Corp ended the quarter with cash and cash equivalents of $1,298.7 million, long-term debt of $2,605.2 million and stockholders' equity of $5,171.7 million. The company also bought back $149 million worth of shares under its existing share repurchase program and resumed dividend payments.

Outlook

Management raised its fiscal 2021 view despite the continued uncertainty related to the new COVID-19 variant Omicron as well as supply-chain and logistics disruptions, which might lead to production and delivery delays across stores and online. The company's outlook assumes transportation shortages, labor shortages and port congestion.

For 2021, revenues are anticipated to be 27-28% year over year (up 25-26% on a cc basis), suggesting an improvement from the earlier mentioned 26-28% (indicating a 24-26% rise at cc). Adjusted earnings are now expected to be $9.25 per share compared with the prior mentioned $8.50. The figure compares favorably against an adjusted loss of $1.97 reported in 2020. The adjusted earnings outlook excludes $48 million of pre-tax costs related to restructuring actions, including lowering headcount in a few international markets, and reducing real estate footprint, comprising certain store closures and reduced office space. It also excludes $21 million of costs associated with the exit from the Heritage Brands Retail business and the $113-million gain expected to be recorded for the Heritage Brands transaction.

For fourth-quarter fiscal 2021, management expects year-over-year revenue growth of 11-14% (up 16-19% on a cc basis). Adjusted earnings are likely to be $1.94 per share, up from 38 cents reported in the prior-year quarter. The gross margin is anticipated to improve year over year, driven by full-price selling and a positive sales mix, which more than offset higher freight costs. The international business is likely to outpace the pre-pandemic revenue levels, while the North America business is expected to remain sluggish due to the lack of tourism.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, PVH has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly 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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