Can Strong Brands Drive PVH Corp's (PVH) Earnings Beat in Q3?
PVH Corporation PVH is expected to register year-over-year top and bottom-line growth when it reports third-quarter fiscal 2023 results on Nov 29. The consensus mark for quarterly revenues is pegged at $2.4 billion, indicating growth of 4.8% from the prior-year reported number.
The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at $2.72 per share, suggesting growth of 4.6% from the year-ago quarter’s reported figure. The consensus mark for earnings has been unchanged in the past 30 days.
In the last reported quarter, the company delivered an earnings surprise of 13.1%. It has a trailing four-quarter earnings surprise of 22.8%, on average.
PVH Corp. Price and EPS Surprise
PVH Corp. price-eps-surprise | PVH Corp. Quote
Factors to Note
PVH Corp has been gaining from the continued momentum in its core brands, Calvin Klein and Tommy Hilfiger, along with pricing actions and strong consumer engagement. The company's Tommy Hilfiger and Calvin Klein brands are anticipated to have performed well in the quarter under review, driven by robust consumer demand.
On the last reported quarter’s earnings call, management was confident about the underlying power of the Calvin Klein and Tommy Hilfiger brands, which position the company’s business to succeed in the ever-changing consumer landscape.
Our model predicts the Tommy Hilfiger brand to register sales growth of 6.8% in the fiscal third quarter. Sales for Calvin Klein are anticipated to increase 3.2% year over year, while Heritage Brands is expected to deliver a sales decline of 2.4%.
The continued momentum in PVH Corp's international unit is likely to have aided the company’s performance in the fiscal third quarter. Management has been on track with its PVH+ Plan, which is likely to result in substantial cost efficiencies and better productivity. PVH expected the business momentum to be positive throughout 2023. These factors are likely to get reflected in the company’s top-line performance in the fiscal third quarter.
PVH has been focused on fueling digital growth by developing a holistic distribution strategy for Calvin Klein and Tommy Hilfiger, driven by digital and direct-to-consumer channels, and wholesale partnerships. PVH has also been focusing on boosting efficiencies to be cost-competitive and, in turn, reinvest in strategic plans. Gains from these efforts are likely to get reflected in the company’s top and bottom lines in the to-be-reported quarter.
On the last reported quarter’s earnings call, management anticipated revenue growth of mid-single digits for third-quarter fiscal 2023. The bottom line is expected to be $2.43, whereas the company reported a loss of $2.88 in the year-ago quarter on a GAAP basis. Adjusted earnings are likely to be $2.70, whereas it reported $2.6 on an adjusted basis. This view includes favorable currency impacts of 15 cents.
The company expects revenue growth in the low-single digits on both reported and constant-currency basis. The bottom line is likely to be $1.70, whereas PVH reported $1.72 in the year-ago quarter on a GAAP basis and $2.08 on an adjusted basis.
However, PVH Corp has been witnessing elevated inventory costs and increased investments to support the company’s strategic initiatives, which have been denting margins. High raw material costs and currency headwinds have been taking a toll on the company’s margins. The gross margin for the fiscal third quarter is expected to reflect higher product costs, the negative impacts of foreign exchange and abnormally high raw material costs.
Additionally, the company has been witnessing an elevated SG&A expense rate from increased investment-related costs for the DTC and international businesses for the past few quarters. This is likely to have dented the operating margin in the to-be-reported quarter.
PVH Corp has been experiencing higher interest rates stemming from the ongoing tough macroeconomic environment. The higher interest rates are likely to have led to increased interest expenses, which are anticipated to have dented the company’s bottom line in the to-be-reported quarter.
On the last reported quarter’s earnings call, management anticipated interest expenses for the fiscal third quarter to be $25 million, whereas it posted $19 million in the year-ago period.
Zacks Model
Our proven model does not conclusively predict an earnings beat for PVH Corp this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
PVH Corp has an Earnings ESP of 0.00% and a Zacks Rank #2.
Stocks Poised to Beat Earnings Estimates
Here are some stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
Five Below FIVE currently has an Earnings ESP of +3.68% and a Zacks Rank of 3. The company is likely to register top-line growth when it reports third-quarter fiscal 2023 results. The consensus mark for FIVE’s quarterly revenues is pegged at $726 million, which suggests growth of 12.6% from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FIVE’s earnings has moved up by a penny to 23 cents per share in the past 30 days. However, the consensus estimate indicates a 20.7% decline from the year-ago quarter’s reported figure.
Costco Wholesale COST currently has an Earnings ESP of +3.49% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports first-quarter fiscal 2024 numbers. The consensus mark for COST’s quarterly earnings has moved up by a penny to $3.44 per share in the past seven days. The consensus estimate suggests growth of 11% from the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for Costco’s quarterly revenues is pegged at $57.7 billion, which suggests growth of 5.9% from the figure reported in the prior-year quarter.
lululemon athletica LULU currently has an Earnings ESP of +0.19% and a Zacks Rank of 3. The company is likely to register increases in the top and bottom lines when it reports third-quarter fiscal 2023 numbers. The consensus mark for LULU’s quarterly earnings has been unchanged in the past 30 days at $2.27 per share. The consensus estimate suggests 13.5% growth from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for lululemon’s quarterly revenues is pegged at $2.2 billion, which suggests an increase of 17.8% from the figure reported in the prior-year quarter.
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