PVH Pulls Off A Rare Feat In Retail These Days: The Beat And Raise Quarter

Reviewing PVH Corp PVH's first-quarter results, JPMorgan said the company achieved a retail rarity with its beat and raise quarter. The firm upgraded the shares of the company and also lifted its price target.

Giving the rationale for its upgrade, JPMorgan said:

• The deep-dive in Calvin Klein would translate into double-digit top-line growth for five-plus years.
• China is a material top and bottom-line opportunity for Tommy Hilfiger.
• No improvement is expected in the North American landscape through 2019.
• Strong balance sheet provides optionality.

Q1 Print

Analyst Matthew Ross, Grace Smalley, Anne Samuel and Steven Zaccone noted that the company reported first quarter adjusted earnings per share of $1.65 compared to the consensus estimate of $1.60, driven by 5 percent constant currency top-line growth and 178 basis point-expansion in margins.

Outlook

JPMorgan noted that the company raised its 2017 earnings per share guidance to $7.40–$7.50 from the previous $7.30–$7.40. The firm clarified that the high end of the management's second-quarter guidance suggests 10-percent earnings per share growth in the first half of 2017 and implying similar growth rate in the second half, despite suggesting a 1,440-basis-point sequential step-down in 2016 second-half growth.

Multi-year, the firm sees increased visibility to a sustainable double-digit bottom-line profile at PVH, as forex headwinds abate, with the combination of Calvin Klein's Europe self-help story and early innings Tommy China growth opportunity. This, according to the firm, equates to a compounding low-double-digit+ EPS growth story despite modeling North American revenues at negative low-single-digits through fiscal year 2019.

As such, JPMorgan upgraded shares of PVH to Overweight from Neutral and lifted its price target to $125 from $116.

At the time of writing, shares of PVH were rallying 5.20 percent to $107.35.