On Monday, RBC Capital Markets initiated coverage on Hermes International (OTC:HESAF) (RMS:FP) (OTC: HESAY (OTC:HESAY)), assigning the luxury goods company an Outperform rating and setting a price target of €2,600. The firm’s analysis indicates that Hermes, currently valued at $298.42 billion, stands out in the luxury sector due to its exceptional brand strength and business model, demonstrated by its impressive 70.26% gross profit margins.
RBC Capital’s coverage highlights Hermes’ position as a top-tier luxury brand, noting its impressive track record of delivering a median annual total shareholder return (TSR) of 17% over the past two decades. This performance is attributed to the company’s unique brand appeal, which is characterized by its scarcity-driven business model and a high degree of vertical integration compared to its competitors. According to InvestingPro, the company has maintained dividend payments for 32 consecutive years, demonstrating remarkable consistency in shareholder returns.
The firm also commends Hermes for its consistent management and ownership structure, as well as its robust financial performance. According to RBC Capital, Hermes’ strong fundamentals offer a defensive investment profile that is particularly appealing in challenging market conditions for luxury goods, despite the brand’s premium valuation at 48 times the forecasted FY26E price-to-earnings (P/E) ratio. InvestingPro analysis shows the company maintains an overall Financial Health score of "GREAT," though current valuations suggest the stock may be overvalued relative to its Fair Value.
Looking forward, RBC Capital forecasts a compound annual growth rate (CAGR) of approximately 10% in revenue and earnings before interest and taxes (EBIT) for Hermes through to FY29E. This projection is notably higher than the sector’s expected average of 5% to 6% for the same metrics.
In summary, RBC Capital’s initiation of Hermes with a favorable rating and ambitious price target reflects the firm’s confidence in the luxury brand’s ability to continue outperforming within its industry.
In other recent news, Bernstein SocGen Group has made adjustments to its financial outlook for Hermes International. Initially, the firm raised its price target for Hermes stock to €2,850.00, maintaining an Outperform rating. This adjustment was based on revised projections that included a positive outlook for the company’s organic growth in the leather goods category. However, Bernstein later revised the price target down to €2,600.00, still retaining the Outperform rating, citing a decrease in growth forecasts and margin expectations. Analyst Luca Solca noted that despite the reduced growth forecasts, Hermes is expected to continue experiencing organic growth, supported by pricing increases and supply/volume growth in its Leather Goods division. The earnings per share (EPS) forecasts for Hermes are now positioned below consensus estimates for fiscal years 2025 and 2026. The valuation of Hermes is based on a target relative price-to-earnings (P/E) multiple of 3.70 times the MSCI Europe index. The Outperform rating reflects Bernstein’s continued favorable view of Hermes, despite potential challenges in the luxury goods market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.