American clothing company PVH Corp. (PVH), formerly known as Phillips-Van Heusen Corporation, delivered robust second-quarter results, driven by strong performances across both the Calvin Klein and Tommy Hilfiger brands and international markets delivering well above 2019 pre-pandemic levels. Shares jumped 7.2% on the news in the extended trading session on August 31.
Revenue for the quarter climbed 46% compared to the year-ago period to $2.31 billion and surpassed analysts’ estimates of $2.14 billion.
Earnings grew a whopping 1,992% to $2.72 per share and significantly outpaced the Street’s estimate of $1.20 per share. (See PVH stock charts on TipRanks)
The company’s outstanding results were achieved by focussing on product strength and winning in the marketplace coupled with strong e-commerce channel sales. Also, PVH’s prior year results were hampered by COVID-19 related store closures.
Stefan Larsson, the company’s CEO, said, “Looking ahead, we are pleased with our recovery, which has been faster than expected across both global brands. Our continued execution of our key strategic priorities will drive business performance in the near-term, while also positioning the Company for long-term, sustainable profitable growth.”
For the third quarter, PVH expects revenue to grow in the range of 11% – 13% year-over-year, and earnings are expected to fall in the range of $1.95 – $2.00 per share.
Moreover, based on the company’s strong first-half results, which reflect gross margins above the 2019 pre-pandemic levels and a further improvement in operating margins, the company raised its earnings guidance for the full year 2021 to $8.50 per share compared to the consensus estimate of $6.75 per share.
Additionally, PVH expects its full-year 2021 revenue to grow by 26%-28% compared to the prior-year quarter.
In response to PVH’s solid quarterly performance, Guggenheim analyst Robert Drbul maintained a Buy rating on the stock with a price target of $130, implying 24.1% upside potential to current levels.
Drbul said, “Given the company’s actions to streamline its organization, coupled with a potentially normalizing retail environment in 2H21 (including improving levels of store traffic, a potential return of tourism travel & spend, and an increase in discretionary spend on more formal apparel, all of which PVH stands to benefit from), we believe PVH is emerging from the pandemic a stronger, leaner, and more profitable company with some favorable year-over-year tailwinds in 2H21.”
Additionally, the analyst notes that PVH’s efforts to drive top-line growth by commanding pricing power, positioning Tommy Hilfiger and Calvin Klein as aspirational brands, matching inventory levels with demand in the right channels, and driving efficient and digital product marketing all bode well for the company.
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 7 Buys, 6 Holds, and 1 Sell. The average PVH price target of $119.79 implies 14.3% upside potential to current levels. Shares have gained 81.8% upside potential to current levels.
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