Shares of PVH Corp. surged 5% Thursday, after J.P. Morgan upgraded the stock to the equivalent of buy after better-than-expected quarterly earnings. The apparel company and owner of Calvin Klein, Tommy Hilfiger and Heritage Brands, beat first-quarter per-share earnings estimates by 5 cents, driven by 5% sales growth and 178 basis points of margin expansion, analyst Matthew Boss wrote in a note. In a rare move for a retail company in the current troubled environment, PVH raised its guidance for the second quarter and full year, with the high end of its range pointing to more than 10% EPS growth in the first half. Boss said the company is on track to achieve sustainable double-digit profit growth for several years as forex pressure eases, and Calvin Klein's Europe business improves along with Tommy Hilfiger in China. "Management sees the Tommy Hilfiger brand (~$1.65B revenues, 13-14% EBIT margin) as a benchmark for Calvin Klein's European opportunity (currently ~$700M revenues at 10%EBIT margin) implying Calvin Klein could profitably grow in Europe at a mid-to-high teens compound annual growth rate for the next 5 to 6 years before reaching Tommy's maturity, complemented by further opportunity in China (mgmt see business doubling over next 3-5 years)," he wrote. Shares have gained 19% in 2017, while the S&P 500 has gained 7%.
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