WRC Warnaco Grp. (The)

Shares of PVH Corp. (PVH) – world’s largest shirt and neckwear company – hit a new 52-week high of $122.68 on Wednesday, Feb 6, before closing at $121.38. This Zacks Rank #3 (Hold) beats its previous 52-week high of $121.26, and has generated a whopping return of approximately 55.6% since Feb 3, 2012. Average volume of shares traded over the last 3 months came in at approximately 910K.

Drivers that Triggered Momentum

An impressive positive earnings surprise history, upbeat fiscal 2012 guidance, and accretive acquisition facilitated the shares of PVH Corp. to gather momentum and achieve a new high.

PVH reported an outstanding bottom-line performance in the third quarter of fiscal 2012, on the back of solid improvement in margins along with a lower tax rate. The company’s adjusted earnings per share jumped approximately 24% year over year to $2.34, beating the Zacks Consensus Estimate by 2.2%. Total revenue of $1.643 billion also came ahead of the Zacks Consensus Estimate of $1.638 billion.

The continued growth momentum across the company’s brands, Tommy Hilfiger and Calvin Klein, prompted management to raise fiscal 2012 earnings guidance range to $6.37–$6.38 per share, up from previous guidance range of $6.32–$6.37. The current Zacks Consensus Estimate for the fiscal is pegged at $6.39 per share, which is penny above the company’s upper-end of the guidance range. Moreover, PVH Corp. expects net sales to increase 2% from fiscal 2011 level.

Further, we believe that the acquisition of The Warnaco Group, Inc. (WRC) will facilitate the company to have operations at every major consumer market in the world, which will ultimately boost its top line. It is expected that the acquisition will increase the company’s 2013 earnings by 35 cents per share.

Stock’s Key Indicators

PVH Corp. currently trades at a forward P/E of 16.37x, reflecting an 18.2% premium to the peer group average of 13.85x. Its price-to-sales ratio of 1.49 is also at a premium to the peer group average of 1.38. Given the company’s compelling fundamentals, the premium valuation is justified and well supported by its long-term estimated EPS growth rate of 14.5% compared with 12.8% for the peer group.

Other Stocks to Consider

Apart from PVH Corp., other stocks in the apparel industry that are portraying strong upward trend in the bourses are Michael Kors Holdings Limited (KORS) and Ralph Lauren Corporation (RL). Michael Kors' and Ralph Lauren’s share prices rose approximately 9.5% and 5.6%, respectively, since both the company’s reported better-than-expected bottom-line performance. Michael Kors has a Zacks Rank #1 (Strong Buy), while Ralph Lauren holds a Zacks Rank #2 (Buy).

 
MICHAEL KORS (KORS): Free Stock Analysis Report
 
PVH CORP (PVH): Free Stock Analysis Report
 
RALPH LAUREN CP (RL): Free Stock Analysis Report
 
WARNACO GRP INC (WRC): Free Stock Analysis Report
 
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