PVH Corp (NYSE:PVH) stock has probably not been on your watch list, but you have most likely encountered clothing brands Calvin Klein and Tommy Hilfiger. Yep, they are both owned by PVH. On Thursday, March 24, PVH stock surged an impressive 7.6% after a solid earnings report. Could this be the start of a new rally?
PVH Stock: 4 Earnings Beats in a Row
As a public company, holding fashion shows isn’t the only task of PVH. Despite the popularity of its brands, the company still needs to create value for shareholders. Luckily, PVH has been delivering some solid earnings lately.
In the most recent quarter, the company reported adjusted earnings of $1.52 per share, beating Wall Street’s expectation of $1.46. (Source: “PVH Corp. Reports 2015 Fourth Quarter and Full Year Results and Provides 2016 Outlook,” PVH Corp, March 23, 2016.)
PVH has a solid track record when it comes to beating earnings estimates. In the past fiscal year, the company has beaten Wall Street’s earnings per share (EPS) estimates every single quarter. (Source: “Analyst Estimates,” Yahoo! Finance, last accessed March 27, 2016.)
Note that under today’s macroeconomic environment, growth doesn’t come that easy for apparel companies. Stiff competition has led to increased promotional efforts from every player in the industry. But PVH still managed to grow its business. The key to the company’s success lies in its most popular brands—Calvin Klein and Tommy Hilfiger.
Momentum has been going strong at Calvin Klein. In the last fiscal quarter, revenue from the brand increased 21% on a foreign exchange (FX) neutral basis. Earnings turned out to be even better, with more than 30% growth on a constant currency basis. Strong bottom-line improvements were helped by the expanding margins in Europe and Asia.
Tommy Hilfiger is another growth driver. PVH bought the brand back in 2010 for $3.0 billion. Fast-forward six years, and the brand is bringing in over $900 million in quarterly revenue for the company.
Europe has been the largest market for Tommy Hilfiger. In the most recent fiscal quarter, comparable store sales increased 10% year-over-year. The neat thing is that growth is continuing into this year. The brand’s spring/summer 2016 wholesale order book shows a four-percent increase, and the company expects similar rises in this year’s fall/holiday wholesale sales. (Source: “PVH CEO Emanuel Chirico on Q4 2015 Results-Earnings Call Transcript,” Seeking Alpha, March 24, 2016.)
Of course, there is always a catch. For PVH, it’s currency headwinds. Like most U.S. multinationals, PVH’s results were adversely impacted by what happened in the foreign exchange market. As the U.S. dollar strengthened against many major currencies, U.S. products became more expensive in foreign markets. At the same time, international revenue and profits are worth less after converting back to the U.S. dollar.
But then again, even under a lackluster global economy and strong currency headwinds, PVH still managed to improve its total sales. The quarter’s revenue came in at $2.11 billion, which reflects a two-percent year-over-year increase on a GAAP basis. Excluding the impact from changes in foreign exchange rates, growth would have been at seven percent.
The Bottom Line on PVH Stock
At the end of the day, let’s not forget the value of PVH stock. Shares of the company currently trade at $94.29 apiece, giving it a price-to-earnings (P/E) multiple of just above 16.00X. By this measure, PVH is not really expensive compared to the industry’s average P/E of 18.07X.
If investors want to invest in the apparel clothing industry, they should take a serious look at PVH stock.