Ralph Lauren Stock To Trade Lower After FY Q4 Results?

RL: Ralph Lauren logo
Ralph Lauren

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 fourth-quarter results on Tuesday, May 24. We expect Ralph Lauren stock to trade lower due to weak fiscal Q4 2022 results with revenues as well as earnings missing consensus marginally. Ralph Lauren has seen an impressive recovery in revenues and cash flow in the last nine months of fiscal 2022. However, soaring inflation and increasing manufacturing and transport costs, which have been compounded by the geopolitical situation in Ukraine, could negatively impact the company’s bottom and top lines in Q4. That said, almost 40% of Ralph Lauren’s production takes place in China and Vietnam – which could lead to costs rising over the coming quarters as well (given the lockdown in China).

Our forecast indicates that RL’s valuation is $93 per share, which is in line with the current market price. Look at our interactive dashboard analysis on RL Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues to be slightly below consensus estimates

Trefis estimates RL’s Q4 2022 revenues to be around $1.44 Bil, marginally below the consensus estimate of $1.46 Bil. In Q3, the retailer’s revenues increased 27% y-o-y to $1.8 billion, driven by the impressive growth of 30% in the North American market during this period. There is no doubt that a significant percentage of this growth is due to a recovery in sales from the prior drop caused by Covid-19 lockdowns. Accordingly, it is reasonable to expect that future growth rates will be more moderate. We now forecast Ralph Lauren’s Revenues to be $6.2 billion for the full year 2022, up 41% y-o-y.

2) EPS expected to marginally miss consensus estimates

RL’s Q4 2022 earnings per share (EPS) is expected to be 37 cents per Trefis analysis, below the consensus estimate of 38 cents. Despite higher marketing costs in fiscal Q3, 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 percentage points in the quarter. This allowed EPS to reach $2.98, compared to $1.63 a year ago.

(3) Stock price estimate in line with the current market price

Going by our Ralph Lauren’s Valuation, with an EPS estimate of around $8.25 and a P/E multiple of 11.2x in fiscal 2022, this translates into a price of $93, which is in line with the current market price.

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.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
 Returns May 2022
MTD [1]
YTD [1]
Total [2]
 RL Return -11% -22% 3%
 S&P 500 Return -6% -18% 74%
 Trefis Multi-Strategy Portfolio -5% -21% 209%

[1] Month-to-date and year-to-date as of 5/23/2022
[2] Cumulative total returns since the end of 2016

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