Shares of PVH Corp. (NYSE:PVH) climbed 10% higher on Thursday after the producer of the Tommy Hilfiger and Calvin Klein clothing brands reporting better than expected earnings, but missed on overall sales.
In its second quarter of fiscal 2015 PVH profited $1.51 per share, topping the Estimize consensus of $1.43. The move represents an increase of 12 cents per share compared to the $1.39 reported in the same quarter of last year.
Total revenue came in at $1.976 billion, up 1% from the $1.965 billion reported in the same quarter of last year. Although overall sales were mostly flat, Tommy Hilfiger was an exceptionally strong brand throughout the quarter, its revenue increased by 9%.
In addition to posting stronger than expected profits in the second quarter, PVH management also reaffirmed its optimistic guidance for the remainder of the year. The company is expecting full year earnings per share to fall between $7.30 and $7.40, up roughly 4.5% compared to calendar 2013. PVH must be anticipating a robust 3rd and 4th quarter to achieve those results after profits fell 23% on a year over year basis in the first quarter of the year.
Although sales were lower than predicted the strong bottom line performance at PVH rubbed off on department stores and retail stocks too. On Thursday Macy’s (NYSE:M) stock was up over 1%, Kohl’s (NYSE:KSS) was up 2%, and JC Penney (NYSE:JCP) shares spiked over 5% higher.
At Estimize we crowdsource expectations from the buy side and independent contributors to come up with an earnings consensus that is more honest than the traditional sell side analysts who have a habit of setting the bar too low. In June the Estimize community had predicted earnings that were way above the Street’s consensus. When PVH narrowly missed the Wall Street number, the company’s stock got hammered and dropped 8%.
After being disappointed last quarter, contributing analysts on Estimize were more in-line with the Street this time around. When PVH crushed the market’s expectations, the stock took off like a rocket ship.
(Graph above from ChartIQ Visual Earnings)
After a company beats the Estimize earnings consensus, on average that stock tends to drift higher over the next 3 days of trading. This drift is independent from the interday gap before the market reopens. News of strong earnings at PVH had a positive impact across retail, but the PVH Corp. was still the big winner on the day. The price of PVH stock initially jumped $9.41 higher when the market opened before drifting an additional $1.88 (1.5%) to the upside throughout the rest of the day. The post earnings drift from Thursday is highlighted above.
You can find independent research from Rice University on the reliability of the post earnings drifts strategy here. To learn more about using the Estimize data set see here.