PVH Corp Pre-Q2 Earnings: Can Investors Expect a Beat Amid Challenges?

PVH Corporation PVH is likely to post a year-over-year decline in its bottom line when it reports second-quarter fiscal 2025 results on Aug. 26, after market close. The Zacks Consensus Estimate for quarterly revenues is pegged at $2.1 billion, indicating a growth of 1.3% from the prior-year number.

The Zacks Consensus Estimate for PVH’s fiscal second-quarter earnings remained unchanged in the past 30 days at $1.97 per share. The consensus estimate indicates a decline of 34.6% year over year.

In the last reported quarter, the company delivered an earnings surprise of 2.7%. It has a trailing four-quarter earnings surprise of 13.5%, on average.

Factors Likely to Impact PVH’s Q2 Earnings

PVH Corp’s second-quarter fiscal 2025 results are likely to reflect the impacts of a challenging operating backdrop. PVH is grappling with a tough operating backdrop in the Asia-Pacific region, particularly in China, where macroeconomic headwinds continue to weigh heavily on consumer sentiment. 

PVH Corp maintains a cautiously realistic outlook for the Asia Pacific region through the rest of fiscal 2025, acknowledging that the environment remains challenging, particularly in China, where consumer sentiment continues to be weak. Impacts from these trends are likely to get reflected in the company’s top line for the fiscal second quarter.

PVH Corp is facing mounting pressure on its gross margins due to a significantly more promotional retail environment across key global markets. This shift is largely driven by weakened consumer sentiment, particularly in the United States and China. Higher raw material costs and currency headwinds are likely to have been concerning. Increased investments in direct-to-consumer and international businesses are likely to have added to extra costs and hurt profitability. Elevated freight costs, due to disruptions in key sourcing locations, further add to the margin pressures.

PVH Corp. Price and EPS Surprise

PVH Corp. price-eps-surprise | PVH Corp. Quote

On the last reported quarter’s earnings call, this elevated promotional activity is expected to persist throughout the rest of fiscal 2025, putting continued pressure on margins, especially as PVH absorbs other cost headwinds such as tariffs and operational challenges at Calvin Klein. This is expected to have hurt margins and the bottom line in the to-be-reported quarter.

While these factors raise concerns, PVH Corp's diversified brand portfolio allows it to stay ahead of peers to generate above-average industry growth and sustain its position in the ongoing challenging environment. The company's approach to brand management facilitates each of its brands to develop further through effective marketing strategies, financial control and operating leverage. Based on the strength of its brands, coupled with opportunities concerning distribution, we believe that the company is poised for top-line growth in the to-be-reported quarter.

Additionally, PVH Corp.’s PVH+ Plan appears encouraging. The plan mainly aims at accelerating growth by boosting its core strengths and connecting its key brands with consumers. PVH aims to deliver top-tier products as it focuses on driving growth in its key categories. PVH plans to expand in global markets where its iconic brands already connect strongly with consumers. Gains from these efforts are likely to have provided some cushion to the quarterly performance.

What the Zacks Model Unveils for PVH

Our proven model does not conclusively predict an earnings beat for PVH Corp. this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they're reported with our Earnings ESP Filter.

PVH Corp. has an Earnings ESP of -2.12% and a Zacks Rank of 3. 

PVH’s Valuation Picture

From a valuation perspective, PVH Corp.’s shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 6.74X, below the five-year median of 8.6X and the Textile - Apparel industry’s average of 11.03X, the stock offers compelling value for investors seeking exposure to the sector.

The recent market movements show that PVH’s shares have lost 8.9% in the past three months compared with the industry's 16.4% decline.

Stocks With the Favorable Combination

Here are some companies, which, according to our model, have the right combination of elements to post an earnings beat this season:

Dollar Tree Inc. DLTR currently has an Earnings ESP of +5.48% and a Zacks Rank of 3. The company is likely to register top and bottom-line declines when it reports second-quarter fiscal 2025 results. The consensus mark for DLTR’s quarterly revenues is pegged at $4.5 billion, which indicates a plunge of 39.7% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.  

The Zacks Consensus Estimate for Dollar Tree’s earnings has moved up by a penny in the past seven days to 37 cents per share. The consensus estimate indicates a drop of 44.8% from the year-ago quarter’s actual. DLTR delivered a negative trailing four-quarter earnings surprise of 6.9%, on average.

Carnival Corporation & plc CCL currently has an Earnings ESP of +1.29% and a Zacks Rank #3. The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings per share has been unchanged in the past 30 days at $1.31, implying 3.2% year-over-year growth. Carnival Corp.’s top line is expected to rise year over year.

The Zacks Consensus Estimate for quarterly revenues is pegged at $8.1 billion, which indicates an increase of 2% from the figure reported in the prior-year quarter. CCL delivered a trailing four-quarter earnings surprise of 169.9%, on average.

Five Below, Inc. FIVE currently has an Earnings ESP of +13.35% and a Zacks Rank of 3. FIVE is likely to register top and bottom-line growth when it reports second-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $997.3 million, indicating 20.2% growth from the figure reported in the year-ago quarter.

The consensus estimate for FIVE’s earnings has moved up by a penny in the past seven days to 61 cents per share. The consensus estimate indicates a growth of 13% from the year-ago quarter’s actual. FIVE has a trailing four-quarter earnings surprise of 42.3%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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