Brean Murray Carret & Co. cut its profit estimates and price target of Phillips-Van Heusen Corp. (NYSE: PVH), saying it makes more sense in the current environment to be conservative.
We continue to view PVH as a core holding and, even with our earnings and price target cuts, view Phillips-Van Heusen as one of the strongest, multi-driver upside business models in our universe; we remain buyers before 4Q earnings, the brokerage said.
Brean Murray, which lowered its price target to $70 from $85, cut fiscal 2012 earnings per share estimate to $4.67 from $5.00, saying it see material uncertainty in the second half. The brokerage has a 'Buy' rating on the stock.
We believe, if the company can successfully pass along double digit costing increases in 2H that our prior estimates could prove achievable, analyst Eric Beder of Brean Murray wrote in a note.
While PVH remains one of our favorite names and we believe is still among the best positioned players in our universe for FY12 (and beyond), there is no reason for us to be aggressive given the current valuations and what has been a litany of lower than expected results from retailers and apparel players centered on rising cotton prices and manufacturing costs, Beder said. As such, we believe it is time to be conservative.
The analyst said if the company can withstand the pricing storm in the second half of fiscal 2012, then his estimates and price target will prove materially conservative; in the meantime, with valuations materially below traditional levels for all of the consumer space, we see no need to be the hero, Beder said.
PVH is scheduled to report its fourth quarter results after the close on Monday.
The brokerage said it believes 4Q was a triumphant quarter, as the company continued to take material market share in the domestic arena, Calvin Klein remained an international growth vehicle and Tommy Hilfiger continues to perform above expectations.
Tommy Hilfiger’s European presence should make first quarter particularly profitable for the unit, the brokerage said.
PVH ended Wednesday's trading 1.47 percent higher at $57.36. In the past 52-weeks, the stock has been trading in the range of $42.81 to $72.42.