UPDATE: Morgan Stanley Upgrades PVH Corp. to Overweight, Reiterates $134 PT

In a report published Monday, Morgan Stanley upgraded its rating on PVH Corp. PVH to Overweight, and reiterated its $134.00 price target. Morgan Stanley noted, “We believe the Warnaco acquisition, which is likely to close in February, improves the risk/reward on PVH significantly. We believe $0.35 accretion guidance is currently conservative and believe proforma EPS for 2013 should be ~$7.80, with an upside bias (but will depend on how much in cost savings gets re-invested into the business). Longer term, there are great opportunities for PVH to improve WRC's operations and improve the overall Calvin Klein brand by better controlling distribution, product, and marketing. In the near term, we believe cost synergies create less downside risk to EPS and longer term see the opportunity for PVH to reach 15% operating margins in the next 3-4 years. In 2013, we expect Tommy Hilfiger growth to be similar to 2012 in Europe (slight deceleration in core offset by tailoring business taken in house) and see the long term opportunity to increase revenues by $450-900M, which is 25-50% growth to European sales and 15-30% growth to total Tommy sales. Our price target is $134, which represents 16% from current levels. We note our bull to bear spread is 2:1, which is the best within our coverage universe.” PVH Corp. closed on Friday at $115.66.