It has been about a month since the last earnings report for PVH (PVH). Shares have added about 4.6% 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 & Sales, Raises EPS View
PVH Corp continued with its earnings beat trend, delivering better-than-expected results in third-quarter fiscal 2019. Both top and bottom lines surpassed the Zacks Consensus Estimate.
Furthermore, management raised earnings outlook for the current fiscal year.
PVH Corp’s adjusted earnings of $3.10 per share fell nearly 3.4% year over year but surpassed the Zacks Consensus Estimate of $3.00. The metric also outshined the company’s guided range of $2.95-$3.00.
On a GAAP basis, the company delivered earnings of $2.82 per share, down 10.5% from $3.15 registered in the year-ago quarter.
However, the reported figure came above the management’s guidance of $2.70-$2.75. Bottom line, both on adjusted and GAAP basis, included an adverse impact of 9 cents per share from foreign currency translations.
In the fiscal third quarter, revenues inched up 3% to $2,587.7 million and outpaced the Zacks Consensus Estimate of $2,581 million. On a constant-currency (cc) basis, revenues improved 4%. This upside was primarily backed by growth at its Tommy Hilfiger and Calvin Klein, somewhat offset by revenue decline at Heritage Brands.
Moreover, the company’s total gross profit rose nearly 3% to $1,406.2 million, with margin increasing 20 basis points to 54.3%.
Further, adjusted EBIT decreased 2.4% to $282 million, including adverse currency impacts of nearly $8 million. Adjusted EBIT was hurt by a decline in earnings at the Heritage Brands business and higher corporate expenses, which were more than offset by earnings growth at Calvin Klein.
PVH Corp reports its financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.
Revenues at Calvin Klein inched up 1% year over year to $969 million (up 3% at cc). The segment’s International revenues grew 7% to $514 million (up 10% at cc).
Robust growth in Europe and gains from the Australia acquisition were somewhat offset by softness in Asia. International comparable-store sales (comps) fell 2%.
Furthermore, the segment’s North America revenues declined 5% to $455 million, mainly due to soft wholesale business. In North America, comps dipped 4%, thanks to lower traffic and weak consumer spending trends.
Revenues at the Tommy Hilfiger segment improved 10% to $1.2 billion (up 12% at cc). International revenues at the segment increased 16% to $821 million (up 20% at cc). The improvement was mainly backed by a stellar performance in Europe and gains from the Australia acquisition as well as comps growth of 8%. Also, the buyout of Tommy Hilfiger retail business in Central and Southeast Asia from the company’s prior licensee in that market (the TH CSAP acquisition) aided growth.
However, the segment’s North America revenues remained flat at $423 million, as growth at North America’s wholesale business was offset by a 5% comps decline.
The Heritage Brands segment’s revenues slumped 13% year over year at $375 million. The decline was mainly owing to softness across the North America’s wholesale business and a 2% fall in comps.
In the first nine months of fiscal 2019, PVH Corp bought back 2.4 million shares for roughly $223 million, under its $2-billion buyback authorization extending up to Jun 3, 2023.
Since its inception, the company repurchased nearly 11.4 million shares for $1.2 billion as part of its commitment under the aforementioned plan.
PVH Corp updated view for the remainder of fiscal 2019. Further, management expects an adverse impact of roughly 20 cents per share from tariffs in the current fiscal year.
For fiscal 2019, the company still projects revenues to increase about 1% (up 4% at cc).
Brand-wise, revenues at Tommy Hilfiger are anticipated to increase roughly 6% compared with 5% growth projected earlier. Further, revenues are expected to decline 2% and 3% at Calvin Klein and Heritage Brands, respectively. At cc, revenues are likely to grow 9% at Tommy Hilfiger and remain flat at Calvin Klein. Earlier, revenue decline at Heritage Brands was projected to be 1%.
Adjusted net interest expenses are expected to decline to nearly $107 million, down from $116 million incurred in fiscal 2018. Further, adjusted effective tax rate is projected in the band of 14-14.5%.
On a GAAP basis, earnings per share is now projected to be $8.04-$8.06 compared with $7.95-$8.05 projected earlier and $9.65 earned last fiscal.
Further, adjusted earnings per share are now envisioned in the $9.43-$9.45 band for the fiscal year, up from the earlier guided range of $9.30-$9.40. It reported adjusted earnings of $9.60 in fiscal 2018. Both GAAP and non-GAAP earnings projections include negative impacts of roughly 35 cents per share from foreign currency.
For fourth-quarter fiscal 2019, PVH Corp expects total revenues to remain flat year over year (up 2% at cc). Brand-wise, revenues are expected to increase 4% (up 6% at cc) at Tommy Hilfiger and 1% at Heritage Brands. However, Calvin Klein revenues are likely to decline 5% (down 3% at cc).
Further, adjusted net interest expenses are anticipated to decline to roughly $25 million in the fiscal fourth quarter.
On a GAAP basis, the company envisions earnings per share of $1.56-1.58 compared with $2.09 in the prior-year quarter. Further, adjusted earnings per share are envisioned in the band of $1.77-$1.79, down from $1.84 earned in the year-ago quarter. Notably, GAAP and adjusted earnings guidance for the fiscal fourth quarter include an anticipated adverse impact of nearly 5 cents from currency.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
At this time, PVH has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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