A month has gone by since the last earnings report for PVH (PVH). Shares have added about 2.2% in that time frame, underperforming 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 catalysts.
PVH Corp (NYSE:PVH) Q4 Earnings Beat Estimates, Revenues Down Y/Y
PVH Corp delivered fourth-quarter fiscal 2018 results, with earnings and revenues beating the Zacks consensus Estimate. In fact, this marks the company’s 19th straight quarter of bottom-line beat. Further, management issued an optimistic guidance for first quarter and fiscal 2019. These positives were enough to boost investors’ sentiments in the stock, which gained almost 10% in the after-hours trading session on Mar 27.
However, the top line declined during the quarter due to unfavorable year-on-year comparison, stemming from the inclusion of 53rd week in 2017. Tough year over year comparisons also impacted results in the Calvin Klein and Heritage Brands segments.
PVH Corp’s adjusted earnings per share were $1.84, which included adverse currency impacts of 9 cents. The bottom line grew nearly 16.5% year over year and surpassed the Zacks Consensus Estimate (and the company’s previous earnings view) of $1.75.
On a GAAP basis, the company’s earnings were $2.09, up 50% from $1.39 in the year-ago quarter. Also, the figure surpassed management’s guidance of $1.54-$1.56.
In the fourth quarter, revenues declined almost 1% to $2,484 million. The downside was caused by an unfavorable year-on-year comparison as fiscal 2017 included an additional 53rd week. Notably, revenues fell nearly $125 million, which included $80 million impact from one lesser week in the fourth-quarter fiscal 2018 and $45 million from the fiscal calendar misalignment in fiscal 2018.
Nevertheless, on a constant-currency (cc) basis revenues depicted an improvement of 2%. The top line also surpassed the Zacks Consensus Estimate of $2,411 million as well as management’s earlier projection of $2.40 billion.
The company’s total gross profit fell roughly 1% to $1,355.5 million and gross margin contracted almost 20 basis points (bps) to 54.6%. Nonetheless, adjusted EBIT was up 9.3% to $193.1 million, including adverse currency impacts of nearly $8 million. Adjusted EBIT growth was backed by improvements in Calvin Klein and Tommy Hilfiger businesses, somewhat countered by soft Heritage Brands business and rise in corporate expenses.
PVH Corp reports financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands. Comparable store sales (comps) across these categories for the reported quarter were computed on a shifted basis to adjust for the additional week in 2017.
Revenues at Calvin Klein declined 2% year over year (flat at cc) to $953 million. The downside was caused by negative impacts of almost $50 million from the inclusion of 53rd week in fiscal 2017. Nevertheless, the segment’s International sales rose 2% (up 6% at cc) to $523 million. International comps improved 6% on a shifted-basis. Further, the segment’s North America sales were down 7% to $430 million due to unfavorable year-on-year comparison as well as persistent weakness in the CALVIN KLEIN JEANS. Comps in this region inched down 1% on a shifted basis.
Revenues in the Tommy Hilfiger segment improved 2% (up 5% at cc) to $1.2 billion. Performance in this category improved despite an adverse $60-million impact from the 53rd week in 2017. International revenues in the segment increased 3% (up 7% at cc) to $721 million. The improvement was driven by a stellar performance in all regions and channels as well as comps growth of 16% on a shifted basis. Additionally, the category’s North America business witnessed revenue growth of 2% to $447 million, with comps rise of 5% on a shifted basis.
The Heritage Brands segment’s revenues declined 5% year over year to $363 million, including adverse impacts from the 53rd week in 2017 of nearly $15 million. Comps in the segment were flat on a shifted basis.
In fiscal 2018, the company bought back roughly 2.2 million shares for $300 million under its $1.25-billion buyback authorization through Jun 3, 2020. Since its inception, the company has repurchased nearly 9 million shares for $992 million as part of its commitment to return value to shareholders.
On March 26, 2019, management authorized an additional $750 million to its existing repurchase program and extended its duration to June 3, 2023.
Management’s guidance for fiscal 2019 includes the assumption that two of its pending buyouts — Gazal Corporation Limited and Dickson Concepts — will be completed in second-quarter fiscal 2019. These businesses are anticipated to augment revenues during the fiscal by almost $150 million.
That said, the company projects revenues to increase 4% (up 5% at cc) during the fiscal. Brand-wise, sales are anticipated to increase roughly 6%, 2% and 3% for Tommy Hilfiger, Calvin Klein and Heritage Brands businesses, respectively. Moreover, sales at Tommy Hilfiger and Calvin Klein are likely to grow 8% and 3% at cc, respectively.
Net interest expenses are expected to increase nearly $128 million, up from $116 million incurred in fiscal 2018, thanks to increased short-term borrowing that are likely to stem from the pending buyouts. Further, adjusted effective tax rate is projected in the band of 14.5-15.5%.
Adjusted earnings per share (EPS) are envisioned in the range of $10.30-$10.40 for fiscal 2019. The guidance reflects an increase from $9.60 earned in fiscal 2018. Also, the mid-point of management’s projected range ($10.35) is currently above the Zacks Consensus Estimate of $10.23.
GAAP EPS are projected to be $8.90-$9.00, reflecting a decline from $9.65 reported in 2018. Earnings projections include negative impacts of roughly 22 cents per share from foreign currency translations on a GAAP and non-GAAP basis.
For first-quarter fiscal 2019, the company expects total revenues to increase nearly 2% year over year and 6% at cc. Brand-wise, revenues are expected to increase 1% (up 5% at cc) at Calvin Klein, 4% (up 10% at cc) at Tommy Hilfiger and 1% at Heritage Brands.
Net interest expenses are anticipated to rise to roughly $31 million in the fiscal first quarter. The adjusted effective tax rate for the quarter is anticipated in the range of 21-22%.
Adjusted EPS are expected to be $2.40-$2.45, up from $2.36 in the year-ago quarter. The current earnings guidance is pegged above the Zacks Consensus Estimate of $2.39.
On a GAAP basis, the company envisions EPS in the range of 25-30 cents compared with $2.29 in the prior-year quarter. GAAP and adjusted earnings guidance include an anticipated adverse impact of nearly 14 cents from foreign currency.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined 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. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 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.
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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