On Tuesday, Jefferies initiated coverage on shares of PVH Corp (NYSE:PVH), the parent company of brands such as Tommy Hilfiger and Calvin Klein, with a Hold rating and a price target of $115. The firm's analysis pointed to a flat operating margin (OM%) for the year 2024, which contrasts with the company's previous guidance that aimed for a ramp toward a 15% OM% goal by 2025.
The report indicated that although PVH Corp is expected to see a gross margin (GM%) increase of 200 basis points in 2024, the company's top-line revenue is projected to decline by 6%-7%. This decrease is primarily attributed to the performance in the European wholesale market, which accounts for roughly 30% of the company's total operations, while North America contributes to approximately 25% of profits.
PVH Corp's management remains optimistic about achieving their 15% OM% goal, albeit the target has been deferred by approximately one to two years. The current guidance for 2024 could potentially serve as a "clearing event" if the company's conservative estimates and incremental cost savings are realized sooner than expected.
The firm acknowledged that while there is potential for a positive outcome, it advises caution. It suggests that evidence of top-line stabilization and successful execution of cost savings would be a more prudent basis for considering investment in the company's stock.
InvestingPro Insights
Jefferies' cautious stance on PVH Corp is reflected in the real-time data and InvestingPro Tips, which provide a nuanced view of the company's financial health and stock performance. With a market capitalization of $6.5 billion and an attractive P/E ratio of 10.3, PVH appears to be valued reasonably in the market. The adjusted P/E ratio for the last twelve months as of Q4 2024 is even lower at 9.22, suggesting a potential undervaluation.
InvestingPro Tips highlight that PVH's management has shown confidence in the company by aggressively buying back shares, and the company boasts a high shareholder yield. Additionally, PVH has a longstanding history of maintaining dividend payments, with 54 consecutive years of payouts, underlining its commitment to shareholder returns. However, it's important to note that 11 analysts have revised their earnings expectations downwards for the upcoming period, and the stock has experienced significant price volatility, with a notable decline over the last month.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available for PVH, which could provide further insights into the company's performance and stock potential. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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