On Wednesday, RBC Capital adjusted its stance on LVMH (EPA:LVMH) Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY), lowering the price target to €710 from the previous €760 while maintaining an Outperform rating. The revision comes as the luxury sector faces a cautious outlook, with LVMH's third-quarter revenue falling short of expectations.
LVMH reported a third-quarter revenue miss of 5%, with its Fashion & Leather goods segment experiencing a 5% organic decline, contrasting with the anticipated 1% growth. This underperformance is largely attributed to a sequential drop in demand from Mainland China and the Chinese consumer market.
The analyst from RBC Capital has expressed a more neutral view on the luxury sector ahead of the third-quarter 2024 earnings, citing substantial EPS revisions and increasing investor interest, which have led to improved valuations. However, the recent revenue update from LVMH suggests that the analyst's earlier optimism may have been premature.
The firm's outlook for the coming quarters is cautious, with limited visibility on when the Chinese market might recover or when there might be an acceleration in the US and European markets. Consequently, the analyst has revised down the full-year 2024 and 2025 earnings per share (EPS) estimates by 6% and 8%, respectively.
Despite the reduced earnings forecasts and price target, LVMH remains RBC Capital's preferred pick within the luxury sector. The firm highlights LVMH's diversified business model, scale advantages, and attractive long-term potential as key factors supporting this preference.
In other recent news, LVMH Moët Hennessy Louis Vuitton SE reported an 8% decline in profit from recurring operations to €10.7 billion, despite a modest increase in revenues for the first half of 2024 with organic growth of 2%, reaching €41.7 billion. Following the company's third-quarter sales report, which showed a 3% decline in constant foreign exchange (cFX) growth, Goldman Sachs (NYSE:GS) reduced its price target for LVMH to EUR770.00 from the previous EUR815.00. The firm maintained its Buy rating on the stock. RBC Capital also sustained its Outperform rating on LVMH with a steady price target of EUR760.00.
Several financial institutions, including Citi, JPMorgan (NYSE:JPM), and Morgan Stanley (NYSE:MS), have lowered their price targets for LVMH due to concerns of weakening demand in Asia and Europe across most divisions. Citi reduced its price target from €830.00 to €789.00, while JPMorgan lowered its price target from €790.00 to €720.00, and Morgan Stanley adjusted its price target from EUR 760.00 to EUR 715.00.
InvestingPro Insights
Despite the recent challenges highlighted in the article, LVMH continues to demonstrate financial strength according to InvestingPro data. The company boasts impressive gross profit margins of 68.53% for the last twelve months as of Q2 2024, reflecting its ability to maintain pricing power in the luxury goods market. This aligns with one of the InvestingPro Tips, which notes LVMH's "Impressive gross profit margins."
Additionally, LVMH's dividend performance is noteworthy. The company has raised its dividend for 4 consecutive years and has maintained dividend payments for 27 consecutive years, as per InvestingPro Tips. This consistent dividend growth, coupled with a current dividend yield of 2.04%, may appeal to income-focused investors despite the recent stock price decline.
It's worth noting that LVMH is currently trading near its 52-week low, with the stock price at 67% of its 52-week high. This could present a potential opportunity for investors who believe in the company's long-term prospects, especially considering that analysts predict the company will remain profitable this year.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for LVMH, providing a deeper insight into the company's financial health and market position.
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