WRC Warnaco Grp. (The)

Shares of PVH Corp.(PVH) reached a new 52-week high of $119.62 on Tuesday, Jan 15, 2013, beating its previous 52-week high of $119.37. The closing share prices of the world’s largest shirt and neckwear company, on Jan 15, 2013, was $119.45, representing a solid return of approximately 68.0% since Jan 3, 2012. Average volume of shares traded over the last 3 months stands at approximately 1,023,710.

Growth Drivers

An impressive record of beating the quarterly earnings expectations, a positive fiscal 2012 outlook, and expanding business through acquisition, are the major growth drivers for the shares of PVH Corp.

On Nov 27, 2012, PVH reported an outstanding bottom-line performance in the third quarter of fiscal 2012. Driven by solid improvement in margins along with a lower tax rate, the company’s adjusted earnings per share jumped approximately 24% year over year to $2.34, beating the Zacks Consensus Estimate of $2.29.

However, the company’s total revenue inched down 1% to $1.643 billion compared with $1.654 billion in the year-ago quarter. The year-over-year revenue growth at the company’s Tommy Hilfiger and Calvin Klein segments were more than offset by the decline at its Heritage Brands segment and unfavorable foreign currency exchange rates. However, quarterly revenue surpassed the Zacks Consensus Estimate of $1.638 billion.

Bolstered by continued growth momentum at Tommy Hilfiger and Calvin Klein brands, the company raised its fiscal 2012 earnings guidance range to $6.37-$6.38 per share, up from previous guidance range of $6.32-$6.37. The current Zacks Consensus Estimate for the fiscal is pegged at $6.39 per share which is above the company’s guidance range. Moreover, PVH Corp. expects net sales to increase 2% from fiscal 2011 level.

Further, we believe that the acquisition of The Warnaco Group, Inc. (WRC) will facilitate the company to have operations at every major consumer market in the world, which will ultimately boost its top line. It is expected that the acquisition will increase the company’s 2013 earnings by 35 cents per share.

Valuation Stretched, Yet Lucrative

PVH Corp. currently trades at a forward P/E of 18.70x, reflecting a 18.0% premium to the peer group average of 15.85x. Its price-to-sales ratio of 1.42 is also at a premium to the peer group average of 1.34. Given the company’s compelling fundamentals, the premium valuation is justified and well supported by its long-term estimated EPS growth rate of 14.5% versus 12.6% for the peer group.

About The Company

PVH Corp., formerly known as Phillips-Van Heusen Corporation, is headquartered in New York. PVH Corp. designs and markets branded dress shirts, neckwear, sportswear, footwear and other related products. The company markets its products at a wholesale level through department store chains and directly to consumers through retail stores. The company's portfolio of brands includes its owned brands and its licensed brands. The company has a market cap of approximately $8.44 billion.

PVH Corp., which competes with Ralph Lauren Corporation (RL), currently, has a Zacks Rank #2 (Buy) rating. However, given the sluggish domestic economic growth coupled with the crisis in Europe and slowdown in China, we remain slightly cautious on the stock and uphold our long-term ‘Neutral’ recommendation.

 
PVH CORP (PVH): Free Stock Analysis Report
 
RALPH LAUREN CP (RL): Free Stock Analysis Report
 
WARNACO GRP INC (WRC): Free Stock Analysis Report
 
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