PVH Q1 Earnings on the Horizon: Here's What Lies Ahead for the Stock

PVH Corporation PVH is likely to post a year-over-year decline in its top and bottom lines when it reports first-quarter fiscal 2025 results on June 4, after market close. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.9 billion, indicating a drop of 0.8% from the prior-year number.

Although the consensus estimate for earnings has moved up a penny to $2.23 per share, the metric indicates a decline of about 9% year over year.

In the last reported quarter, the company delivered an earnings surprise of 2.5%. It has a trailing four-quarter earnings surprise of 16.4%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Factors Likely to Impact PVH’s Q1 Earnings

PVH Corp’s first-quarter fiscal 2025 results are likely to reflect the impacts of a challenging operating backdrop. 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.

In addition, the company has been witnessing sluggishness in its Heritage Brands segment for quite some time now, owing to the decline in the sale of the Heritage Brands women's intimates business. The wholesale channel remains under pressure, owing to a decline in sales of the Heritage Brands women's intimates business and PVH Corp.’s ongoing efforts to reduce sales in Europe. Aforesaid limitations are likely to have hurt PVH’s sales and earnings performance during the to-be-reported quarter.

On its last earnings call, management had anticipated revenues to be flat to down 2% (flat to down 1% in constant currency) year over year for the fiscal first quarter. It had forecast the gross margin to contract roughly 250 basis points, due to higher freight costs and incremental discounts owing to the Calvin Klein product delays. PVH had then envisioned first-quarter operating margin to be 8-8.5%, down 150-200 basis points year over year. Interest expenses are anticipated to increase to $20 million compared with $18 million in the first quarter of 2024.

PVH Corp. had projected earnings per share, on a non-GAAP basis, in the range of $2.10-$2.25 for the impending quarter, lower than the $2.45 reported in the year-ago quarter. This view included an unfavorable currency impact of five cents a share.  The Zacks Consensus Estimate for Calvin Klein and Heritage Brands Wholesale sales is currently pegged at $876 million and $43.2 million, respectively, indicating a year-over-year drop of 1.2% and 16.9%.

While these factors raise concerns about the outcome, 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 the 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’s not the case here.

PVH Corp. Price and EPS Surprise

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

PVH Corp. has an Earnings ESP of -1.05% and a Zacks Rank of 2. You can uncover the best stocks before they're reported with our Earnings ESP Filter.

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 6.47X, below the five-year median of 8.92X and the Textile - Apparel industry’s average of 12.72X, the stock offers compelling value for investors seeking exposure to the sector.

The recent market movements show that PVH’s shares have gained 19.1% in the past three months against the industry's 6.5% 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 DLTR currently has an Earnings ESP of +7.86% and a Zacks Rank of 3. The company is likely to register top and bottom-line declines when it reports first-quarter fiscal 2025 results. The consensus mark for DLTR’s quarterly revenues is pegged at $4.5 billion, which indicates a plunge of 40.5% 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 a couple of cents to $1.20 per share in the past 30 days. The consensus estimate indicates a drop of 16.1% from the year-ago quarter’s actual. DLTR delivered a negative trailing four-quarter earnings surprise of 8.4%, on average.

Dollar General Corporation DG currently has an Earnings ESP of +3.15% and a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter fiscal 2025 earnings per share has increased a penny in the past 30 days to $1.47, implying a 10.9% year-over-year decline. Dollar General’s top line is expected to rise year over year.

The Zacks Consensus Estimate for quarterly revenues is pegged at $10.3 billion, which indicates an increase of 3.7% from the figure reported in the prior-year quarter. DG delivered a trailing four-quarter earnings surprise of 1.2%, on average.

lululemon athletica LULU currently has an Earnings ESP of +1.82% and a Zacks Rank of 3. LULU is likely to register top-line growth when it reports first-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.4 billion, indicating 6.6% growth from the figure reported in the year-ago quarter.

The consensus estimate for LULU’s earnings has been stable at $2.58 per share in the past 30 days. The consensus estimate indicates a drop of 1.6% from the year-ago quarter’s actual. LULU has a trailing four-quarter earnings surprise of 6.6%, on average.

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

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