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BB&T Capital Markets Rated Ralph Lauren a ‘Buy’

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May. 23 2016, Published 3:03 p.m. ET

Price movement of Ralph Lauren

Ralph Lauren (RL) has a market cap of $7.5 billion. It rose by 2.8% to close at $91.63 per share on May 20, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 7.2%, -2.6%, and -17.4%, respectively, on the same day. This means that RL is trading 0.77% above its 20-day moving average, 2.0% below its 50-day moving average, and 13.2% below its 200-day moving average.

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Related ETFs and peers

The SPDR S&P 500 Growth ETF (SPYG) invests 0.04% of its holdings in Ralph Lauren. The ETF tracks an index of primarily large-cap growth stocks. The index selects companies from the S&P 500 Index based on three growth factors. The YTD price movement of FTA was -1.1% as of May 20, 2016.

The market caps of Ralph Lauren’s competitors are as follows:

  • V.F. Corporation (VFC): $25.9 billion
  • HanesBrands (HBI): $10.6 billion
  • PVH Corporation (PVH): $7.3 billion

BB&T Capital Markets rated Ralph Lauren

BB&T Capital Markets has initiated the coverage of Ralph Lauren with a ‘buy’ rating and set the price target at $115.0 per share.

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Performance of Ralph Lauren in 4Q16 and 2016

Ralph Lauren reported fiscal 4Q16 net revenues of $1.9 billion, a fall of 0.74% as compared to net sales of $1.9 billion in fiscal 4Q15. Net revenues from its wholesale segment fell by 6.5%, and sales from its retail and licensing segments rose by 5.7% and 8.1%, respectively, in fiscal 4Q16 over fiscal 4Q15. The company’s cost of goods sold as a percentage of net revenues rose by 2.7%. Its operating income fell by 64.7% in fiscal 4Q16 over 4Q15.

RL’s net income and EPS (earnings per share) fell to $41 million and $0.49, respectively, in fiscal 4Q16, compared to $124 million and $1.41, respectively, in fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, RL reported net revenues of $7.4 billion, a fall of 2.8% YoY (year-over-year). It reported impairment of assets and restructuring and other charges of $49.0 million and $143.0 million, respectively, in fiscal 2016, as compared to $7.0 million and $10.0 million, respectively, in fiscal 2015.

Its net income and EPS fell to $396 million and $4.62, respectively, in fiscal 2016, compared to $702 million and $7.88, respectively, in fiscal 2015.

Ralph Lauren’s cash and cash equivalents fell by 8.8%, and its inventories rose by 8.0% in fiscal 2016. Its current ratio fell to 2.5x, and its debt-to-equity ratio rose to 0.66x in fiscal 2016, as compared to a current ratio and a debt-to-equity ratio of 2.8x and 0.57x, respectively, in fiscal 2015.

Now let’s take a look at Goodyear Tire & Rubber Company (GT).

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