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Ralph Lauren Got ‘Neutral’ Rating from Guggenheim

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Price movement

Ralph Lauren (RL) has a market cap of $8.3 billion. It rose 1.5% to close at $101.14 per share on September 30, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 1.8%, -1.9%, and -7.8%, respectively, on the same day.

RL is trading 1.2% above its 20-day moving average, 0.03% below its 50-day moving average, and 4.3% above its 200-day moving average.

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Related ETF and peers

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.73% of its holdings in Ralph Lauren. The ETF tracks an index that selects and weights value stocks from the S&P 500 Value Index using fundamental factors including sales, book value, and cash flows. The YTD price movement of FTA was 10.8% on September 30, 2016.

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

  • VF Corporation (VFC): $23.3 billion
  • Hanesbrands (HBI): $9.5 billion
  • PVH Corporation (PVH): $8.9 billion

Ralph Lauren’s rating

Guggenheim has initiated coverage of Ralph Lauren with a “neutral” rating.

On September 29, 2016, CLSA initiated coverage of Ralph Lauren with a “buy” rating and set the stock’s price target at $125 per share.

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Performance of Ralph Lauren in fiscal 1Q17

Ralph Lauren reported fiscal 1Q17 net revenues of $1.6 billion, a fall of 4.1% from $1.6 billion in fiscal 1Q16. Revenue from its wholesale, retail, and licensing segments fell 5.5%, 3.0%, and 7.3%, respectively, between fiscal 1Q16 and fiscal 1Q17. The company’s gross profit margin fell 3.4%.

Its net income and EPS (earnings per share) fell to -$22.0 million and -$0.27, respectively, in fiscal 1Q17 compared with $64.0 million and $0.73, respectively, in fiscal 1Q16. It reported adjusted EPS of $1.06 in fiscal 1Q17.

Ralph Lauren’s cash and cash equivalents and inventories rose 0.22% and 10.4%, respectively, between fiscal 4Q16 and fiscal 1Q17. Its current ratio fell to 2.3x, and its debt-to-equity ratio rose to 0.72x in fiscal 1Q17 compared with 2.5x and 0.66x, respectively, in fiscal 4Q16.

Projections

Ralph Lauren has made the following projections for fiscal 2Q17:

  • consolidated net revenues to fall to mid-to-high single digits
  • tax rate of ~29%
  • operating margin to fall 2.0%–2.5% year-over-year

The company has made the following projections for fiscal 2017:

  • consolidated net revenues to fall at a low-double-digit rate, including a proactive pullback in inventory receipts, store closures, pricing harmonization and other sale initiatives, in a weak retail and high promotional environment in the United States
  • operating margin of ~10%
  • tax rate of ~29%
  • annualized expense savings of $180 million–$220 million from restructuring activities related to changes in the organizational structure and right-sizing of its cost structure and real estate portfolio.

Next, we’ll look at PACCAR (PCAR).

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