Cowen Slashes PVH Price Target: 'We Need More Clarity On Sustainable Free Cash Flow'

PVH Corp PVH shares are moving higher after the apparel company reported a second-quarter earnings beat Wednesday.

One analyst cut their price target significantly on the stock after the quarterly print. 

The Analyst 

Cowen’s John Kernan maintained a Market Perform rating on PVH and lowered the price target from $95 to $80.

The Thesis

Although Kernan said he's not trying to call the bottom on PVH shares, he said the investor focus needs to shift to free cash flow.

The analyst said he expects consensus EPS estimates to take a 12% to 15% cut heading into 2020. (See his track record here.) 

“The sell-side is overly focused on ‘adjusted EPS’; we need more clarity on sustainable free cash flow (with inventory turn at all-time lows) before becoming more constructive,” he said in a Thursday note. 

PVH lowered its guidance, which now implies an 8.8% decline in EBIT dollars vs. previous guidance for 3.6% growth.

A large portion of this is due to the company’s exposure to the deteriorating wholesale and outlet channels, Kernan said. 

“Given rapidly deteriorating wholesale conditions and increasing trade tensions, we believe EBIT dollars will decline once again in FY20,” the analyst said. 

Tariffs could cost PVH anywhere from 60 cents to $1.20 in EPS next year, "with further pressure coming in international markets," according to Cowen. 

Price Action

PVH shares were higher by 5.42% at $75.47 at the time of publication Thursday. 

Related Links:

2 Reasons Deutsche Turned Bullish On PVH Corp

Goldman Sachs Bullish On Tapestry, VF Corp, Tiffany; Says Sell PVH

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsApparelCowenJohn Kernan
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