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On Friday, PVH Corp (NYSE:) received an upgrade from TD Cowen, moving from a “Market Perform” rating to “Outperform.” The firm also significantly increased the price target for the company’s shares to $150.00, up from the previous target of $86.00.
The upgrade comes as the analyst believes the market is underestimating PVH’s potential to enhance its Calvin Klein and Tommy Hilfiger brands. Key to this assessment is the expectation of faster inventory turnover, increased profit margins, and a developing narrative around capital allocation. The analyst suggests these factors will contribute to a more robust capital structure, including a $600 million debt paydown and a 10% reduction in share float.
These strategic moves are expected to support mid-teens growth in earnings per share (EPS). The new estimates set by TD Cowen are above the consensus into the fiscal year 2025. The price target of $150.00 is based on 12 times the estimated EPS for fiscal year 2024, which is $12.48, surpassing the consensus estimate of $11.94.
Furthermore, the analysis projects a free cash flow (FCF) of $1.2 billion for fiscal year 2025. When compared to sector peers such as Levi Strauss & Co (NYSE:)., VF Corporation (NYSE:), Gap Inc (NYSE:)., Abercrombie & Fitch Co., and Ralph Lauren Corp (NYSE:)., PVH Corp is considered to be valued attractively on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) basis. Despite this, consensus estimates remain significantly lower than the targets set by the management of PVH Corp.
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