PVH Dips 4.2% Post Q3 Earnings: Buy, Hold or Avoid the Stock?

PVH Corporation’s PVH shares have lost 4.2% in the past week despite a robust third-quarter fiscal 2024 performance. This was due to gains from the strong execution of the PVH+ Plan, which led to robust gross margin expansion and growth in adjusted earnings per share (EPS). The gross margin expanded 170 basis points in the reported quarter, thanks to a favorable shift in channel mix and a fall in sales to low-margin wholesale accounts. The company's international and direct-to-consumer businesses have also grown year over year .In addition, PVH’s multi-year strategy PVH+ Plan to drive sustainable growth appears encouraging. The plan mainly aims at accelerating growth by boosting its core strengths and connecting Calvin Klein and TOMMY HILFIGER brands with the consumers.Despite such strengths, investors’ sentiments were hurt due to the bleak outlook for the fourth quarter and trimmed upper-end view for EPS for fiscal 2024. Although shares of this apparel designer have gained 16.7% in the past three months, the Textile - Apparel industry has grown to 31.4%. Also, the broader Consumer Discretionary sector has risen 20% in the same time frame.PVH Stock Past Three-Month PerformanceImage Source: Zacks Investment ResearchNow let’s assess the company’s third-quarter fiscal 2024 results, outlook and other factors to make a better judgment on the stock.PVH’s Q3 Results & OutlookPVH reported third-quarter fiscal 2024 adjusted EPS of $3.03, which increased 4.5% year over year and beat the Zacks Consensus Estimate of $2.61 as well as the company’s guidance of $2.50. The figure included the positive impacts of foreign currency translations of 5 cents a share. Earnings surpassed the consensus mark for the 15th straight time in the reported quarter. PVH Corp. has a trailing four-quarter average earnings surprise of 17.3%Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The company's international business’ revenues jumped 0.4% as growth in Asia Pacific in local currency was more than compensated by the strategic reduction of sales in Europe to improve overall sales quality in the region. Direct-to-consumer revenues climbed 0.4% year over year while revenues in the company’s owned and operated physical stores rose 0.7%.Despite such strengths, management projects fourth-quarter revenues to decline in the range of 6-7% (down 4-5% in constant currency) from the year-ago quarter, including a 1% reduction related to the Heritage Brands sale and a 3% fall from the 53rd week last year. EPS, on a non-GAAP basis, is expected to be in the range of $3.05-$3.20, down from $3.72 earned in the year-ago quarter. This view includes an unfavorable currency impact of 9 cents per share. For fiscal 2024, the company anticipates a year-over-year revenue decline in the range of 6-7%, which is consistent on a constant currency basis. This includes a 2% reduction due to the divestiture of the Heritage Brands women’s intimates business and a 1% impact from the 53rd week in fiscal 2023. Management now envisions adjusted EPS to be in the range of $11.55-$11.70 compared with the earlier view of $11.55-$11.80.What do the Estimates Say About PVH?The Zacks Consensus Estimate for PVH Corp.’s fiscal 2024 EPS has remained stable at $11.75. The consensus estimate for fiscal 2025 EPS has dipped 0.7% to $12.53 over the past 60 days.For fiscal 2024, the Zacks Consensus Estimate for PVH’s EPS implies 10% growth year over year. For fiscal 2025, the consensus mark for sales and EPS indicates 1.3% and 6.6% year-over-year increase, respectively.Image Source: Zacks Investment ResearchAnalyzing PVH’s Pros & ConsThe company continues to lean into the next level of PVH+ Plan execution being North America being a strong point of the PVH+ execution. In Europe, it is on track with the efforts regarding the targeted quality of sales, while in APAC, it has been seeing robust consumer engagement.PVH has been making another move in consumer engagement for Calvin Klein and TOMMY HILFIGER this fall. It has been further boosting the key growth categories and offering sturdy transitional products with innovation. The company looks to make improvements in its data and demand-driven supply chain, leading to increased stock freshness and quality products. It has also been driving efficiencies to invest back into growth, hence making progress to simplify the work.PVH Corp. has been making constant efforts to expand its international business. In the direct-to-consumer channel, the company concentrates on advancing its product offerings and innovation to its key products. For wholesale, it has been driving product strengths and robust sell-throughs as it continues working with its major partners to boost the product category and enrich the customer shopping experience.On the flip side, PVH is grappling with a tough operating backdrop. In addition, the company’s Heritage Brands has been sluggish for quite some time now. The segment's revenues plunged 54% year over year in the third quarter of fiscal 2024. This included a 44% year-over-year decline in the sale of the Heritage Brands women's intimates business.PVH Stock’s Attractive ValuationPVH stock is trading at a discount valuation relative to the industry. Going by the price/earnings ratio, it is currently trading at 8.71 on a forward 12-month basis, lower than 15.07 for the industry. Also, the stock is trading lower than its five-year median of 9.52.Image Source: Zacks Investment ResearchFinal Words on PVH StockOverall, the company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success.PVH’s robust strategies, including the PVH+ initiative and expansion efforts, position it well for growth. The company’s appealing valuation further acts as a positive. PVH currently carries a Zacks Rank #3 (Hold).Stocks to ConsiderWe have highlighted three better-ranked stocks, namely Planet Fitness PLNT, Gildan Activewear GIL and Royal Caribbean RCL.Planet Fitness, the leading franchisor and operator of fitness centers, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. Planet Fitness has a trailing four-quarter earnings surprise of 7.8%, on average. The Zacks Consensus Estimate for PLNT’s current financial-year sales indicates growth of 8.9% from the year-ago figure.Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average. The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 15.6% from the year-ago figure.Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 16.2%, on average.The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 18.6% and 71.6%, respectively, from the year-ago levels.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report PVH Corp. (PVH): Free Stock Analysis Report Gildan Activewear, Inc. (GIL): Free Stock Analysis Report Planet Fitness, Inc. (PLNT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks