Ralph Lauren (NYSE: RL), a company engaged in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, fragrances, and home furnishings, is scheduled to report its fiscal third-quarter results on Thursday, February 3. We expect Ralph Lauren stock to trade higher due to strong fiscal Q3 2022 results with revenues as well as earnings beating consensus. The digital transition and accelerating demand in key geographies, including the U.S. and China, should continue to drive growth for the company going forward.
Ralph Lauren lifted its forecast for the holiday season quarter and expects revenue to rise by about 15%, which will allow revenue gains to land between 34% to 36% on a 53-week reported basis, having previously estimated an annual increase of 25% to 30% growth. The company also raised its outlook on profit margin and earnings, leading to a significantly improved financial path.
Our forecast indicates that RL’s valuation is $130 per share, which is 17% higher than the current market price. Look at our interactive dashboard analysis on RL Earnings Preview: What To Expect in Q3? for more details.
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(1) Revenues to be slightly ahead of consensus estimates
Trefis estimates RL’s Q3 2021 revenues to be around $1.7 Bil, marginally above the consensus estimate of $1.6 Bil. In the fiscal second quarter, the retailer’s revenues increased 25%y-o-y after adjusting for currency swings, driven by its booming digital segment. We now forecast Ralph Lauren’s Revenues to be $6 billion for the full year 2022, up 35% y-o-y.
2) EPS expected to be well ahead of consensus estimates
RL’s Q3 2021 earnings per share (EPS) is expected to be $2.34 per Trefis analysis, comfortably above the consensus estimate of $2.18. Despite soaring costs (higher marketing costs) in fiscal Q2, Ralph Lauren managed to boost its gross profit margin as price increases offset higher expenses. Further, the company’s operating margin also jumped higher by 4.5 percentage points in the quarter. This allowed adjusted EPS to reach $2.62, compared to a net loss of $0.53 a year ago.
(3) Stock price estimate higher than the current market price
Going by our Ralph Lauren’s Valuation, with an EPS estimate of around $7.51 and P/E multiple of little under 17.3x in fiscal 2022, this translates into a price of $130, which is 17% higher than the current market price. This represents a P/EBITDA multiple of 9.4x for the company based on our forecast for RL’s EBITDA for the current fiscal year.
It is helpful to see how its peers stack up. RL Peers shows how Ralph Lauren compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
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