PVH Earnings: Brighter Outlook Provides Confidence in Strategic Plan; Shares Undervalued

After offering disappointing 2024 guidance in April, no-moat PVH reported first-quarter EPS above our estimate. While we still believe that the PVH+ plan's targets, including a 15% operating margin, are too high given competitive pressures, we also believe progress is being made on its key initiatives related to marketing, cost cuts, and direct-to-consumer operations. Thus, we think PVH can lift its operating margins to about 12% in two years from about 10% at present. We expect to raise our $140 fair value estimate by a low-single-digit percentage on the results, leaving shares undervalued.