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Will Soft Calvin Klein Unit Mar PVH Corp's (PVH) Q2 Earnings?

Zacks Equity Research

PVH Corporation PVH is slated to release second-quarter fiscal 2019 results on Aug 28.

Notably, the company has an impressive earnings surprise history, having outpaced the Zacks Consensus Estimate in the last 20 quarters. Moreover, it has an average trailing four-quarter beat of 3.9%.

Let’s see how things are shaping up prior to this quarterly earnings release.

Which Way Are Q2 Estimates Headed?

For second-quarter earnings, the Zacks Consensus Estimate is pegged at $1.89, indicating roughly 13.3% decrease from the prior-year quarter’s figure. Estimates remained stable in the past 30 days.

PVH Corp. Price and EPS Surprise

PVH Corp. Price and EPS Surprise

PVH Corp. price-eps-surprise | PVH Corp. Quote

The consensus mark for quarterly revenues is pegged at $2.33 billion, which is almost flat with the year-ago reported number.

Factors at Play

PVH Corp is witnessing softness in its Calvin Klein business since the past few quarters. This is likely to persist in the to-be-reported quarter. Notably, soft Calvin Klein unit has been hurting the company’s consolidated sales, which lagged the Zacks Consensus Estimate in two of the last three quarters. Issues related to the Calvin Klein’s Jeans business due to fashion miss are the primary reason behind the segment’s dull performance.

In the last reported quarter, the segment’s International revenues fell year over year and North America revenues were somewhat hurt by decline in comparable store sales (comps). Moreover, adverse impacts of foreign currency translations and weakness in China hurt Calvin Klein’s performance.

In fact, management expects currency headwinds to weigh on the company’s earnings throughout fiscal 2019 due to the continued strengthening of the U.S. dollar on account of the entire macro and geopolitical context. Currency is expected to dent adjusted earnings by nearly 6 cents in second-quarter fiscal 2019. Moreover, revenues at Calvin Klein are projected to decline 4%, and 2% at constant currency (cc) in the to-be-reported quarter. The metric is also likely to fall 2% at Heritage Brands.

For the fiscal second quarter, adjusted earnings per share are expected to be $1.85-$1.90, down from $2.18 earned in the year-ago quarter.

Nevertheless, the company expects total revenues to remain flat year over year (up 2% at cc) for the fiscal second quarter. Further, revenues are anticipated to increase 3% (up 6% at cc) at Tommy Hilfiger. PVH Corp’s Tommy Hilfiger brand is consistently experiencing strong momentum and market share gains for quite some time. In fact, the brand’s performance remained sturdy in first-quarter fiscal 2019, backed by a stellar performance in Europe and comps growth.

Further, PVH Corp expects revenues to benefit from the acquisition of 78% interest in Gazal Corporation Limited, and the pending buyout of the Tommy Hilfiger retail business in Hong Kong and certain other countries in Central and Southeast Asia (the “TH CSAP acquisition”). These acquisitions are likely to augment revenues by $150 million in fiscal 2019. Moreover, the company is likely to gain from its international business and digital operations in the quarter to be reported.

A Glance at the Zacks Model

Our proven model does not show that PVH Corp is likely to beat earnings estimates in second-quarter fiscal 2019. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although PVH Corp has a Zacks Rank #3, the company’s Earnings ESP of -1.99% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Target Corporation TGT has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +1.13% and a Zacks Rank of 2.

Zynga Inc. ZNGA has an Earnings ESP of +18.27% and a Zacks Rank #3.

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