PVH (PVH) is forecast to post lower earnings, but higher revenue than last year when it reports its 2016 third quarter results after Wednesday's market close, Wall Street analysts said.
Analysts surveyed by FactSet are looking for adjusted earnings of $2.40 per share on revenue of $2.23 billion. During the same quarter a year ago, the parent company of Calvin Klein and Tommy Hilfiger earned an adjusted $2.66 per share on revenue of $2.16 billion.
Deutsche Bank analysts said the company is well positioned for the second half of the year and 2017.
"We favor PVH stock as years of investments in Europe, wholesale, direct to consumer (DTC), and design are paying off, and as Calvin Klein & Tommy see momentum. Also, we believe that 2H guidance (and our model) is conservatively positioned, in part as 'less bad' dept. store & tourism headwinds are likely not strongly factored in," the firm wrote in a note today.
Improved results from department stores should sustain the company's wholesale strength, Deutsche Bank added. Inventories continue to be well controlled with the year-over-year spread in sales and inventory growth for J.C. Penney (JCP) , Dillard's (DDS) , Nordstrom (JWN) , Macy's (M) and Kohl's (KSS) ending the third quarter up 3.1% compared to growth of 1% in the second quarter, according to the firm.
Although the department store group's comparable-store sales are still negative, the average improved to a decline of 1.4% in the third quarter vs. a drop of 1.6% in the second quarter, Deutsche Bank said. More importantly for PVH, Kohl's and J.C. Penney noted third-quarter outperformance in men's apparel, while Macy's and Nordstrom cited strength in denim.
But PVH stock is not without risks as it has run up about 47% year-to-date and there is a higher investor bar for companies to beat expectations and raise guidance, Deutsche Bank noted.
On its second-quarter conference call in August and at a conference in early September, PVH management reiterated that tourist spending in its U.S. stores had not improved and that it was planning for second half of the year comparable-store sales declines similar to those in the first half of the year. However, the company said comparisons would ease "soon" and that it will have inventory available to take advantage of any improvement.
PVH, whose other brands include Speedo, Van Heusen and Izod, is rated "buy" with a $125 price target at Deutsche Bank. The stock was lower by 0.03% to $108.10 in early-morning trading on Tuesday.