Discusses 3 recent insider trades, Q2 results, Q3 outlook and some anlayst commentary
Insider Buying At PVH Corp
Shares of American clothing conglomerate PVH Corp (NYSE:PVH) mounted a 5% share price rally though Wednesday afternoon as three of the company’s executives filed form 4’s with the SEC disclosing recent purchases made during the approved insider trading windows that occurred post Q2 results last week.
The small bounce that occurred on Wednesday is all but a small blip on the year-to-date share price chart shown below. PVH’s investors have endured a painful year with the stock trading about -48% lower.
Q2 2022 hedge fund letters, conferences and more
However, insiders of the company have been seeing value in the group's share price. The stock currently trades on an undemanding price to earnings (PE) ratio of ~4x and has a dividend yield of about 0.278%
The transactions were first spotted in Fintels insider trading tracker later on Wednesday afternoon.
The most significant of the trades was a hefty transaction worth $1 million by the groups CEO Stefan Larsson. Larsson acquired 18,540 shares at an average price of $53.94 per share.
The transaction boosted Larsson’s total share count 15.7% higher to a total of 136,541 shares, worth approximately $7.7 million.
Executive Vice President and group CFO, Zac Coughlin purchased 1,857 shares at an average price of $53.85 for a total transaction value of $100,000. Coughlin’s total share count rose to 22,913 after the trade.
The final insider to lodge a form 4 was CEO of subsidiary Tommy Hilfiger, Martijn Hagman. Hagman purchased 1,856 shares at $53.93 per share, for a total transaction value of $100,000. The Transaction boosted Martijn’s total share count to 51,442.
PVH’s 3 net insiders buying shares in the company, give the company a percentile rank of 95.39%, which is quite high when screened against 215,112 other securities.
Q2 Earnings
PVH’s second quarter results that preceded the insiders trades, saw the company generate $2.13 billion in revenue which was flat on a constant currency basis over the year but decreased in real terms. Analysts had forecasted the company to generate slightly above $2.2 billion for the quarter.
The firm posted adjusted earnings per share of $2.08, which beat consensus forecasts around $2.01 and company guidance of around $2.00.
While the financial results were broadly in-line with market expectations, management's third quarter and full year guidance updates spooked the market.
For the upcoming third quarter, management expects to generate adjusted earnings per share of about $2.67 (below consensus estimates around $2.80) and expects group sales to decline 4-5% when compared to the previous year.
For the full year, PVH downgraded earnings per share forecasts by -11% to $8, from $9 previously. The company did note that this value includes an increased negative impact of about $1.25 per share related to Forex headwinds.
Management now believes annual revenue will decline 3-4% over the year compared to previous guidance where they suggested sales would grow 1-2% over the FY.
Post result, analyst Paul Kearney from Barclays commented, stating he believes investors remain sceptical on the company's pathway to achieving $12.5 billion in sales with a 15% operating margin by FY25 which is why the company is trading on a cheap PE valuation.
Kearney lowered future forecasts for the company and reduced his target from $87 to $60 to account for slowing sales growth and margin pressures. Barclays remains ‘equal-weight’ rated on the stock.
On the contrary, more upbeat analysts from UBS, Jay Sole and Shoshana Pollack reiterated their ‘buy’ call on the stock and bullish $84 price target. They believe the brand has the strength and balance sheet to drive earnings growth over the long-term despite the macroeconomic headwinds currently faced.
The firm also highlights that CEO Larsson has only just begun executing on his plan to improve profitability.
On average, PVH Corp yields an 'overweight' ratings across the market with a consensus price target of $72, which has almost halved throughout 2022.
Article by Ben Ward, Fintel
