Here's Why PVH Corp (PVH) is Poised for Q3 Earnings Beat

PVH Corporation PVH is expected to register year-over-year top and bottom-line growth when it reports third-quarter fiscal 2021 results on Dec 1. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at $2.07 per share, suggesting growth of 56.8% from the year-ago quarter. The consensus mark for earnings has moved up by a penny in the past seven days.

The consensus mark for quarterly revenues stands at $2.4 billion, indicating an improvement of 13.4% from the prior-year reported number.

In the last reported quarter, the company delivered an earnings surprise of 128.6%. Its bottom line surpassed estimates by 177.5%, on average, over the trailing four quarters.

PVH Corp. Price and EPS Surprise

PVH Corp. Price and EPS Surprise

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

Key Factors to Note

PVH Corp has been gaining from brand strength, particularly Calvin Klein and Tommy Hilfiger, backed by market share growth and strong demand. The company has been gaining from improved traffic in stores, which reflects significant growth from the prior year, owing to reopening of stores and reduced restrictions.

PVH has been witnessing momentum in the digital business as customers shifted to online purchases. Robust growth across all regions and brands might have driven revenues in the digital commerce business in the fiscal third quarter as well. The company’s initiatives to expand its digital business and strengthen its network with third-party digital partners are expected to have contributed to digital sales growth in the fiscal third quarter. Investments in omni-channel capabilities and improved inventory also bode well.

The company is likely to have witnessed continued momentum in the international unit in the fiscal third quarter, driven by solid performance in Europe. On the last reported quarter’s earnings call, management predicted that the international business is likely to witness higher revenues than second-quarter fiscal 2019 for the rest of the year. This indicates that momentum in international business is likely to have sustained in the fiscal third quarter.

It has been witnessing favorable margin trends in the past few quarters, which are expected to have continued in the fiscal third quarter. The gross margin may have benefited from reduced promotional selling and robust performance across all regions. On the last reported quarter’s earnings call, management anticipated gross margin to improve for the remaining part of the year, backed by less promotional selling and a favorable shift in regional sales mix.

However, PVH Corp has been witnessing rising costs for the past few quarters. Management predicted elevated freight and other logistic costs in the second half of fiscal 2021 as compared to the first half. Consequently, the ongoing cost pressures are likely to get reflected in the company’s fiscal third-quarter results. It also foresees roughly $60 million of pre-tax costs related to restructuring actions, including lowering headcount in a few international markets, and reducing real estate footprint, comprising certain store closures and reduced office space.

PVH Corp’s North America unit has been performing poorly for a while now, which is expected to have continued in the fiscal third quarter. Although the company is focused on streamlining the North American business, management predicted the unit to remain drab as international tourism is not expected to return to growth in fiscal 2021. Alongside this, PVH Corp continues to expect uncertainty related to COVID-19 to hurt earnings and revenues in the second half, reflecting impacts in the fiscal third quarter.

Zacks Model

Our proven model conclusively predicts 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

PVH Corp has a Zacks Rank #2 and an Earnings ESP of +1.61%.

Stocks to Consider

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this season:

lululemon athletica LULU currently has an Earnings ESP of +1.44% and a Zacks Rank of 2. The company is expected to register top and bottom line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for LULU’s quarterly revenues is pegged at $1,43 billion, which suggests growth of 28.1% from the prior-year quarter.

You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for lululemon’s quarterly earnings moved up by a penny in the last 30 days to $1.37 per share, suggesting a 19.8% decline from the year-ago reported number. However, LULU has delivered an earnings beat of 25.2%, on average, in the trailing four quarters.

GIII Apparel Group GIII currently has an Earnings ESP of +8.14% and a Zacks Rank #3. GIII is anticipated to register top and bottom-line growth when it reports third-quarter fiscal 2021 results. The Zacks Consensus Estimate for quarterly earnings moved up 2.3% in the last 30 days to $1.79 per share, suggesting growth of 36.6% from the year-ago quarter's reported number.

The Zacks Consensus Estimate for GIII Apparel’s quarterly revenues is pegged at $1.01 billion, indicating an improvement of 22.4% from the figure reported in the prior-year quarter. GIII has delivered an earnings beat of 180.5%, on average, in the trailing four quarters.

Dollar General DG currently has an Earnings ESP of +0.79% and a Zacks Rank #3. DG is likely to register top-line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $8.51 billion, which suggests growth of 3.7% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Dollar General’s quarterly earnings has remained unchanged in the last 30 days at $2.02 per share, suggesting a decline of 12.6% from the year-ago quarter. DG has delivered an earnings beat of 12.1%, on average, in the trailing four quarters.

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