Could PVH’s 4Q17 Be Another Quarter of Margin Improvement?



PVH to post double-digit earnings growth again

As we’ve already seen in this series, PVH (PVH) is slated to release its fiscal 4Q17 results on March 28, 2018. Management has predicted a 15%–17% increase in EPS (earnings per share). Profits are projected to be $1.42–$1.44 during the quarter. Currency is expected to have a $0.02 positive impact on its bottom line.

Wall Street’s average forecasts are above the upper end of management’s guidance. Analysts expect a 20% increase in earnings to $1.48 per share. The fashion giant’s performance has been extraordinary when it comes to exceeding consensus expectations. It has delivered an earnings beat for 14 consecutive quarters and has missed profit expectations only once in the previous 28 quarters.

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PVH’s profitability

PVH’s gross margin has improved over the last seven quarters. It increased 180 basis points during the first nine months of 2017, primarily driven by fewer promotional activities and a change in its sales-mix for its international business. Continued growth of the company’s international markets is likely to push gross margin expansion going forward.

PVH’s profitability compared to its peers

PVH recorded a TTM (trailing-12-month) gross margin of 54.7%, up 215 basis points over the same period last year. The company currently has above-average profitability. In comparison, VF Corporation (VFC), Guess (GES), and Hanesbrands (HBI) recorded TTM gross margins of 50.5%, 34%, and 41.5%, respectively. Ralph Lauren (RL) and Tapestry (TPR) have better margins of 59% and 65%, respectively.

ETF investors seeking to add exposure to PVH can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.3% of its portfolio in PVH.

In the next part, we’ll take a look at PVH’s valuations and earnings potential


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