UBS Raises Price Target on PVH Corp. (PVH) to $125; Reiterates Buy
UBS reiterated a Buy rating on PVH Corp (NYSE: PVH), and raised the price target to $125.00 (from $115.00), following the company's 2Q earnings report.
Analyst Michael Binetti commented, "We think the EPS upside opportunity from improving 2H GMs is underappreciated: 1) FX pressure abates in 2H (especially in 4Q, we est FX pressure diminishes to ~-80bp YOY from -220-240bp YOY in 1H); 2) GM compares get 150bp easier in 2H16 (vs. 1H16); 3) US d-store inventories are much cleaner—which should reduce industry promotional pressure; 4) a higher YOY mix of sales from high-GM businesses (TH China & GIII license). We’re modelling GMs +135bp YOY in 3Q & +195bp in 4Q (vs. +90bp & +50bp in 1Q & 2Q). Importantly, ’16 guidance for GMs at 53% implies SG&A dollars will increase by ~10% YOY in 2H vs. guidance for 2H revs to be up just +2%—making SG&A guidance look conservative. PVH remains the most visible beat & raise story in apparel in 2H. We’re raising our ’16E EPS to $6.75 (from $6.65), based on 1) revs +3% ex-FX (CK +7%; TH +5%); 2) GMs +120bp; 3) 180bp of SG&A deleverage."
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Shares of PVH Corp closed at $107.37 yesterday.